Bloomberg News

Rwanda Inflation May Reach 8.7% by End of 2011, Gatete Says

October 05, 2011

(Updates with governor’s comment in third paragraph, economist’s comment starting in fourth.)

Oct. 5 (Bloomberg) -- Rwanda’s inflation rate is expected to remain below 10 percent in 2011 and end the year at 8.7 percent, National Bank of Rwanda Governor Claver Gatete said at a conference today in Kigali, the capital.

Inflation in the East African nation accelerated to 7.52 percent in August from 7.14 percent in July, the National Institute of Statistics of Rwanda said last month. Gatete attributed the acceleration to rising prices in the region.

“We import oil,” Gatete said today in an interview. “At the same time we know that food prices have been going up, so that means for the food and the other commodities that we import, the prices go up. But, also, we have drought in the region.”

Rwanda’s inflation rate has been rising at a slower pace than rates for its regional neighbors because of the country’s carefully regulated currency, said Yvonne Mhango, a Johannesburg-based economist with Renaissance Capital.

“They firmly manage the exchange rate,” she said today in an interview in Kigali. “That helps counter imported inflation. On the contrary, you see the case of Uganda, and in Kenya, you see this huge depreciation of the shilling that is fed through the inflation number.”

On Friday, Rwanda’s central bank will say whether it will adjust the country’s key repo rate to counter inflation. Mhango said the bank should raise the rate after maintaining it at 6 percent for the first three quarters of 2011.

“Given that the inflation trajectory still seems to be on the incline, I think there is room to tighten in the second half of the year,” she said.

Rwanda’s economy doubled in the nine years before 2010, according to the World Bank, as it recovered from the 1994 genocide in which about a million ethnic Tutsis and moderate Hutus were slaughtered in 100 days.

Economic growth last year was 7.5 percent and may exceed the government’s 7 percent target this year, the central bank said last month.

Mhango called 6 to 7 percent economic growth in 2011 for Rwanda “achievable.” Renaissance Capital predicts Kenya will grow at 4.3 percent, while the regions’ other large economies, Uganda and Tanzania, will grow at 5 to 6 percent, she said.

--Editors: Heather Langan, Louis Meixler

To contact the reporter on this story: Heather Murdock in Kigali at hmurdock1@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net.


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