The National Bank of Rwanda (BNR) has increased the repo rate from 5% to 6% in a bid to reduce inflationary pressures while preserving the purchasing power of consumers.

The revision of the repo rate is part of resolutions of the quarterly Monetary Policy Committee (MPC) meeting held on 9th August 2022.

Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation.

According to BNR, the increase in lending rate was reached following an analysis by the MPC which pointed out high inflationary pressures driven by global supply challenges as well as lower domestic agriculture output.

Others include the increase in prices for key commodities such as oil, gas and food as well as the war between Russia and Ukraine which are two major producers and exporters of oil, gas, fertilizers, metals, cereals and son-flower seed oils.

Domestically, lower domestic food supply linked to climate constraints and increased prices of inputs have led to increased food prices.

In line with the above, Rwanda’s economy is projected to grow by 6% while the headline inflations is projected to average around 12.1% in 2022.

“Given these developments and the outlook, the MPC decided to increase the Central Bank Rate [CBR] by 100 percent basis points from 5.0 to 6.0 percent, with the aim to reduce inflationary pressures and therefore preserve the purchasing power of consumers.

Consistent with the monetary policy and other measures, inflation is expected to decelerate towards the 5 percent benchmark in the second half of 2023,” reads a statement from BNR.