Board of Directors

Operating Environment: Rwanda

Operating Environment: Rwanda

The year 2018 showed a continued improvement of economic activities, increasing growth and narrowing of the trade balance gap compared to the prior two years. It was estimated that the economy grew by 8.6% in 2018, markedly higher than the projected rate of 7.2%, and 550 basis points higher than the 3.4% reported in 2017. The story of steady growth above 7% on average since 2007 has been maintained through sound economic policies, government-led investment with donors, major infrastructure projects and relatively strong performance in agriculture, initially in coffee and tea but with an increasing share in non-traditional agriculture exports.

Economic growth has mainly been driven by the service, trade, transport and ICT sectors which all recorded growth. Moreover, the Construction and mining sectors also marked growth following the increase in the international metal prices. Lastly, the agriculture sector grew by 8%, supported by positive weather conditions that were experienced in the region in 2018. These conditions permitted a good growth in maize, bush beans, cassava and banana, which led to growth in food crops, export crops and livestock.

Annual inflation was mainly driven by imported items whose cost went up by 3.4 % in December 2018 and by 3.3 % the previous month. Excluding food and energy, consumer price index went up by 1.4 % when compared to December 2 2017.
Through FY2017/2018, Money Market interest rates have been declining in line with an accommodative monetary policy stance and improved banking system liquidity conditions. The weighted normal rate of T-Bills decreased from 8.78% in 2017 to 6.64% in 2018 while lending rates slightly declined to 15.6% in 2018 compared to 17.4% in 2017.

The Rwandan Franc (RWF), like most currencies in the sub-Saharan Region, depreciated by 4.8% against the USD in 2018, majorly due to the relatively increased demand for dollars to finance imports. However, pressures on exchange rate remained moderate due to the significant increase in exports, at 23.8% increase, while imports grew by 7%. Additionally, the ‘Made in Rwanda’ initiative and international conferences in Rwanda injected further foreign currencies in the economy, supporting the RWF.

2019 holds great prospects for the Rwandan economy and banking in general, with the economy is projected to grow at 7.8% in 2019 and 8.0% in 2020.

These forecasts are supported by export growth resulting from the Made in Rwanda policy, continued public investments such as the Bugesera International Airport, which will boost tourism and finally, through the country’s strong record of implementing reforms to achieve its long-term development goals.