Brexit vote affects pound transactions in Rwanda

A woman poses looking at a chart showing the drop in the pound sterling against the US Dollar in London on June 24, 2016 after Britain voted to leave the EU. The pound collapsed to a 31-year low and there was pandemonium on currency, equity and oil markets on June 24 as Britain voted to leave the European Union, fuelling a wave of global uncertainty. AFP PHOTO  

By IVAN R MUGISHA

In Summary

• The pound sterling fell to $1.34 dollars, its lowest level since September 1985, following Britian’s vote to leave the EU.
• Economic experts argue that the UK breakaway is likely to affect prices of raw material exports from the East African region.

Transactions in pound sterling stalled across Rwanda as dealers anticipated the withdrawal of Britain from the European Union.

Rwandan remittance startup Mergims suspended buying the pound sterling for eight hours, following similar moves by international money transfer agencies Transferwise and Azimo, which suspended pound sterling transactions for 24 hours during the referendum vote.

The pound sterling fell to $1.34 dollars, its lowest level since September 1985, following Britian’s vote to leave the EU.

“We were advised to stop taking pounds during the voting process,” said Louis-Antoine Muhire, founder and CEO of Mergims Solutions, adding, “Indeed, the pound was very volatile and it was not wise to buy it at the time. We, however, have resumed trading because we don’t expect it to fall any further against the dollar.”

Mr Muhire said the volatility in the financial market will be short-lived because it “will adjust itself” in the long run.

“The referendum was mostly emotional. The EU and UK need each other and they will definitely still find ways to co-operate economically. Most of the people who voted to leave also wanted David Cameron to resign, and now they have got what they wanted. Economically, nothing much will change,” said Mr Muhire.

Regional effect

Economic experts argue that the UK breakaway is likely to affect prices of raw material exports from the East African region.

“The dollar is going to be a bit more expensive. Prices for materials like minerals are likely to get worse because the dollar will be unfavourable in the short run,” said Manaseh Nshuti, an economist and former politician.

“Aid from the UK and the EU is likely to face a few problems because they have now to adjust some of their policies. However, the EAC region could gain heavily from the fact that now the UK will focus more on strengthening its commonwealth programmes,” said Mr Nshuti.

Mr Nshuti said Britain’s withdrawal from the EU should signal to EAC politicians that integration efforts can collapse if not all countries are satisfied with the process.

“It is better for regional integration to be driven by people-centred needs rather than political agendas,” he said.