Rwanda's franc is likely to fall 8 percent in 2016 and about 5 percent in each of the two following years, central bank governor John Rwangombwa said, as a construction boom fuels the demand for dollar-priced imports. Adding to the downward pressure on the franc, the nascent mining sector, a significant foreign exchange earner, has been hit by the global fall in commodity prices, pushing the trade deficit out to $297 million in first two months of this year.
The currency has lost 11 percent of its value against the dollar in the last year, eating into foreign exchange reserves, and now trades near a record low of 775, according to Thomson Reuters data. Rwangombwa said the government was trying to compensate by phasing its investment projects and embarking on a "Made in Rwanda" import-substitution drive, but accepted that the franc was going to have to weaken.
"According to our three-year plan, we expect the pressures to continue but not take us to any crisis," he told Reuters late on Monday in his offices in the capital, Kigali. Given the drop in foreign exchange reserves, the International Monetary Fund has said the authorities should allow the exchange rate to "adjust as necessary". The governor did not give a figure for reserves but said there was no question of Rwanda, which launched a $400 million Eurobond in 2013, being unable to meet its obligations.
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