The National Bank of Rwanda (BNR) has cut the Central Bank Rate (CBR) from 5% to 4.5% to support commercial banks to continue financing the economy following recent negative economic developments caused by the COVID-19 pandemic.
The decision was made by the Monetary Policy Committee (MPC) on April 29, 2020 that had met to assess recent economic developments at global and national level. The meeting was held amidst global economic challenges caused by the pandemic and the implementation of various measures to contain its spread.
A statement from the BNR said the decision is cognizant that inflation is projected to decelerate in the second half of 2020, owed to a drop in aggregate demand.
The economy has taken a hit and growth is expected to drop to 3.5%. The NBR also said that it has eased prudential requirements to exceptionally allow banks to restructure outstanding loans of borrowers facing temporary cash flow challenges arising from the pandemic.
On April 10, banks had restructured 7,952 loans (out of 8,667 applications), worth FRW255 billion. This followed earlier decision on March 18, to ease liquidity conditions in the banking sector that yielded immediate impact. The measure included FRW 23.4 billion that was injected into the system on April 1, through a reduction of the reserve requirement ratio from 5% to 4% plus a FRW 50 billion lending facility currently available to banks at the Central Bank Rate (CBR).
The Committee noted that global economic growth is projected to decline sharply by 3% in 2020, a downward revision from a 3.3% growth previously projected by IMF in January.
This severe economic downturn is a result of the effect of the #COVID-19 pandemic that has claimed over 200,000 lives, with more than 3 million cases reported globally to date, leaving many economic activities restricted and countries in a lock down over the past few weeks.