The cost of borrowing will remain relatively high unless Rwandans learn to keep billions of francs stashed away in homes with commercial banks, the central bank has warned.
John Rwangombwa, the governor of the
Last June, BNR relaxed its monetary policy by lowering the repo (the rate at which it lends to commercial banks) from 7.5 to 7 per cent hoping to stimulate credit to the private sector and boost slowing economic growth but the move fell short. Real Gross Domestic Product (GDP) growth had slowed down from 6.4 per cent in the first quarter to 5.7 per cent and the 3.9 per cent in the second and third quarters of 2013.
"We [at BNR] arrived at that decision after realising that the economy had grown at a slower pace in the first quarter of last year compared to 2012 as a result of reduced government spending and lower lending to the private sector," he said. He was presenting the quarterly Monetary Policy and Financial Stability Statement yesterday.
Rwangombwa said that as a result of that decision, short-term interest rates have been declining since June last year which has led to short term liquidity in the economy. However, the average commercial bank lending rate fell marginally to 16.9 per cent from 17.2 per cent.
The treasury bills rate fell to 5.6 per cent as of December last year from 10.8 per cent in June last year while the repo and interbank interest rates fell to 3.9 per cent and 5.6 per cent respectively from 6.7 per cent and 9.6 per cent in the same period.
The governor said that rigidity in lending rates is due to the high operating costs representing 76.7 per cent of the total interest income on average during the last fiscal year and high provisions for bad loans. Non-performing loans rose from 6 per cent in
He added that last year commercial banks deposit rates fell to as low 15 per cent and if Rwandans would make more deposits, banks would have more sources of funding for projects that required long-term financing.
Figures released by the governor however show modest increase in bank deposits from about 783 bn in
Credit to the private fell to Rwf 472.5bn from Rwf 498.8bn recorded in 2012, an indication fewer borrowers were willing to take on expensive credit.
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