A forex bureau. The National Bank of Rwanda has set aside over $300
million for forex exchange market in bid to shore up the franc. PHOTO |
FILE
The National Bank of Rwanda has set aside over
$300 million (Rwf210 billion) for the local forex exchange market in bid
to shore up the franc.
Central bank vice-governor Monique Nsanzabaganwa
said the intervention is intended to smoothen the volatility of the
currency market to protect the franc against foreign currencies.
“When there is volatility in the currency market,
it is not good for the private sector, we come in to mitigate the
unpredictability.”
“The currency trade is market driven, we monitor
the currency market variations, and when we see a gap, we sell to the
banks, but it also comes with necessity and now its necessary,” she
noted.
Should not cause panic
However, Mrs Nsanzabaganwa said the depreciation of the franc against the dollar should not cause panic in the market.
The forex line will be sold to the commercial banks in the current financial year.
The economy registered a decline in export
receipts by 1.9 per cent in the second quarter of this year, widening
the country’s trade deficit by 12.14 per cent.
The franc depreciated 6.1 per cent against the
dollar in 2013. This together with the aftershocks of the aid cuts
affected business with some currency dealers folding up.
The central bank predicts the depreciation rate to
rise to four per cent by the end of the year, but with the current
acute shortage of dollars in the currency market, the rate is likely to
increase.
At the end of last year, the dollar was trading at
Rwf680 and on January 1 it rose to Rwf682. Today, the greenback trades
at a staggering Rwf700.
From 2011, there has been an almost 20 per cent increase in the cost of the dollar against franc.
From 2011, there has been an almost 20 per cent increase in the cost of the dollar against franc.
A forex bureau dealer said the dollar scarcity is affecting their business.
He noted that foreign currency sales to commercial banks by the central bank, does not normally affect any change.
“The forex sold to commercial banks does not
trickle down to us, it doesn’t change anything, they use it for their
client withdrawals, even when they sell, they sell to a few forex
bureaus,” he said.
He added that the high volumes of imports and the
high charges on dollar withdrawals by commercial banks are partly
responsible for this scarcity.
The banks charge over 1.5 per cent on dollar withdrawals of the transferred money, because of this people have resorted to withdrawing money in francs because it is cheaper, this has left the market with a dollar shortage,” he added.
The banks charge over 1.5 per cent on dollar withdrawals of the transferred money, because of this people have resorted to withdrawing money in francs because it is cheaper, this has left the market with a dollar shortage,” he added.
High demand
Chief financial officer of Bank of Kigali, John
Bugunya, said his bank has enough forex to serve their clients but noted
that there is a general high demand for the dollar in the market.
“We have enough forex to meet the demand of our
clients. The demand is there in the general market but for us here, we
don’t have any acute shortage,” he said.
Among East African Community member countries, the
franc depreciated by 5.3 per cent against the Kenyan shilling, 6.2 per
cent against the Tanzania shilling, 11.7 per cent against Ugandan
shilling and 4.9 per cent against the Burundian franc.
The francs real effective exchange rate
depreciated 2.7 per cent in December 2013, which was mainly attributed
to the depreciation of the nominal value of the franc against currencies
of the major trading partners.
In 2013, the banking sector recorded an increase
of 12.4 per cent in forex resources compared with 2012, but expenditures
increased 22.9 per cent, leading to a cash deficit of $64.3 million by
end 2013 by commercial banks.
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