The National Bank of Rwanda will aim to keep inflation below 7.5 percent this year, lower than a previous estimate of 8 percent, newly appointed Governor Claver Gatete said.
The inflation rate climbed to 5 percent in April from 4.1 percent a month earlier as food and fuel prices increased. Last month, former Governor Francois Kanimba said inflation may reach 8 percent this year. Gatete, who was appointed as Kanimba’s replacement on May 6, said the official estimate is that inflation will reach 7.5 percent by the end of the year.
“We don’t want it to go that far,” he said in an interview after his swearing-in ceremony on May 13 in Kigali, the capital. “We are fighting inflation.”
The National Bank of Rwanda kept its key lending rate unchanged at 6 percent last month, after three reductions in the past year, to help boost lending and support the economy’s expansion. Rwanda’s Finance Ministry has forecast economic growth in the coffee-growing country will slow to 7 percent this year from 7.5 percent in 2010 as poor rains curb agricultural production.
The central bank hasn’t decided whether it will raise interest rates to curb inflation, Gatete said.
Rwanda’s national budget will increase to 1.12 trillion Rwandan francs ($1.85 billion) in the 2011-12 fiscal year, from 984 billion francs a year earlier, according to the Ministry of Finance. The increase has been accounted for in the central bank’s inflation projection, Gatete said. Inflation advance last month largely because of higher food and fuel costs, he said.
While food prices are still rising, the rate of increase has slowed, he said. In April, food prices climbed 6 percent, after jumping 8 percent in the previous month. Higher fuel prices are mainly due to political instability in the Middle East and are beyond the bank’s control, he said. Gasoline prices in Rwanda increased 14 percent between January and April, according to industry regulators.
“We can only control the effects,” Gatete said.
Gatete, a former ambassador to the U.K. and previously a deputy governor at the central bank, replaced Kanimba after his predecessor was named as the new minister of trade.
Gatete said he plans to focus on modernizing communication systems, training staff and improving research capabilities at the bank during his tenure as governor.
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