Rwanda’s newly appointed governor is bullish over the economy hitting it’s projected growth numbers for 2025 growing at above 7 per cent. CNBC Africa’s Aby Agina had an exclusive sit down with the newly appointed first female Governor in the country’s history Soraya Munyana Hakuziyaremye. The discussion kicked off with an overview of the state of Rwanda’s macroeconomic scene.
Rwanda’s newly appointed governor is bullish over the economy hitting it’s projected growth numbers for 2025 growing at above 7 per cent. CNBC Africa’s Aby Agina had an exclusive sit down with the newly appointed first female Governor in the country’s history Soraya Munyana Hakuziyaremye. The discussion kicked off with an overview of the state of Rwanda’s macroeconomic scene. Here is more. When we look at the macroeconomic indicators, especially for 2024, I would say they all show resilience of our economy but also robust growth. So in 2024 our GDP growth was at close to 9 per cent, 8.9 per cent, which is very robust and also higher than the projections we had had for the year which stood at 8.3 per cent. So we are quite happy about that. Second is also how we have seen inflation reduce substantially. 2022 and 2023, like in many sub-Saharan African countries, our inflation rates were in double digits at 14 per cent in 2023. But we ended 2024 with an average annual inflation rate at 4.2 per cent. So we reduced it by more than three times. And there were a number of factors due to that. One, a very good agricultural season in 2024 that reduced the food inflation. But also globally we saw commodity prices also reducing. And as a central bank, of course, our primary mandate is price stability. So having an inflation that's lower than the 5 per cent, that's our benchmark, is something that is commendable. And then in terms of also exports, we've seen that our exports increased by 6.9 per cent in the year. Although our imports remain high, but they didn't increase at the same rate, only by 5 per cent, which allowed us to reduce a little bit our trade deficit. So those are sort of strong macroeconomic indicators. But of course, we know that as we go to 2025, we also expect our inflation to remain our target band between 2 per cent and 8 per cent. And even going to 2026, our inflation should still be in that band. Interesting. And Governor, looking at the current economic drivers, what would you say contributed towards this performance of the economy? And at the same time, I do know that you've mentioned that inflation is within the target, but what are some of the risks that you see ahead? And so all these sectors of the economy really grew substantially, especially services, a growth of 10 per cent, industry 10.3 per cent. And agriculture also recovered with a growth rate of 5 per cent. So I think it's a growth that's evenly distributed across the three subsectors of the economy. In terms of risks that we see ahead, I think as you know, the global economy has been going through a series of crises in the last five years, starting with the pandemic. And I think as economic managers of our country, we've learned how to navigate those crises. What we see as a key risk, if we look at inflation, for instance, one of the key risks could be, one, if there were any adverse weather events that would impact the agricultural production. Second, also geopolitical tensions that would have an impact on international trade or supply chain. So these are risks that we continue to monitor. And as you know, we have quarterly Monetary Policy Committee meetings that looks at those risks and then we adjust our policy accordingly. All right. And Governor, you recently released the Financial Stability Report, and I do know that it's a timely report that captures the pulse of the economy. What are some of the key takeaways from the report and what are you seeing from your dashboard? So the recent financial stability statement, we looked at how our financial sector was performing over 2024. And there also being in the banking sector, insurance or microfinance and even pension fund across all subsectors, it's strong growth with financial sector assets now representing close to 69 percent of GDP. Our growth in double digits being in banking assets, insurance assets or pension fund assets. We've also looked at, you know, the growth of loans. These also new loans increased by 16 percent. But in addition to that, when we look at all prudential ratios that the financial sector has to comply with, our financial sector is adequately capitalized with, for instance, banking having a capital adequacy ratio above 20 percent. And this is way above the 15 percent minimum requirement. In terms of non-performing loans, also the asset quality is really good with only 3.1 percent of non-performing loans, which is below the 5 percent benchmark that we track. And in terms of liquidity across all these subsectors are adequately liquid. And this gives us confidence as financial regulator that in case of external shocks, our financial sector is able to weather the storms. So that's also very positive indicators in that sense. And coming to the tail end of our conversation, in terms of the outlook for Q2, as well as the potential risks, projections so far for Rwanda's financial stability, and of course the anticipated challenges that might shock the economy. And of course, these are areas that you've already highlighted, but I just wanted to get your outlook for Q2. What will be driving the economy and what are some of the key issues that you're looking at, plus the strategies that you're looking to employ? On the financial stability, I think that the risks that we see that could have a negative impact on our economic resilience are also valid for the financial sector. So we continue to track, of course, any external shocks in terms of, let's say, on inflation itself. But as I mentioned, it looks that it will be contained. What we have done as well is to make sure that we understand the risks that our financial sector faces in terms of climate-related risks. And this is something that's quite new, where we first issued guidelines for our financial sector to start measuring, but also reporting on their portfolio and what the impact of any climate shock would test. So we're starting to look at their reporting. Second, we're also assisting the financial sector to understand what the reporting means, disclosure, which will allow us also to start some modelling and stress testing of, let's say, if we had very severe floods, what would that mean on the portfolio of our banks or microfinance institutions? As you remember, 2023, we had floods in the northern and western province. Fortunately, there were not many outstanding loans in that sector, but you can imagine if there were floods across the country, portfolios of our banks, but also claims on our insurance would go up. So those, I think, climate-related risk is something that we track. Second risk also, as in every country where the financial sector is digitising rapidly, is cyber security risk and operational resilience of IT systems. We've conducted a number of reviews, diagnostic of the cyber resilience of our financial sector, and then we discussed with the different institutions where we see gaps. We've also established a financial sector security operational centre, which is a centralised system in the central bank, to track any cyber threat in the sector and be able to inform all financial players of a particular attack that we would see on any of the institutions. And that allows us not only to detect early any cyber security threat, but also deploy mitigation measures timely. So cyber security, climate-related risk, this is on our mind. We don't have sort of heightened concerns on the credit risk. As I mentioned, really we can see that the banks have also strengthened their risk management practices, which allow them to not only recover quickly overdue loans, but be able also to reduce non-performing loans. But we continue to monitor because sometimes, for instance, institutions that are concentrated in one particular sector, any shock to that sector would have severe consequences. So we continue also our stress testings in terms of, you know, having scenarios of any shock to their portfolio. Do they have enough capital buffers? And in case we see that the capital buffer is really thin, we ask those institutions to strengthen the capital. All right. And finally, Governor, I'm just keen to hear your closing thoughts, especially on the currency. We've seen a lot of activity happening on that front. Any concerns around that? And what does the next couple of months hold for the Rwandan franc? For the Rwandan franc, you know, there has been in 2022, 2023, when the U.S. Federal Reserve was tightening its monetary policy, we saw across the board the U.S. dollar strengthen. And the U.S. dollar is the currency that we use mostly in international trade, even here in Rwanda. And that had, of course, an impact, one, on the exchange rate, the USD versus the Rwandan franc, plus an import bill, especially for investments in our manufacturing that went up at the same time in 2023. So the depreciation was really high at 18 percent. But we are happy to see that that trend has now stabilized with, you know, halving the depreciation rate in 2024, where the Rwandan franc versus the U.S. dollars lost 9 percent. It's still high, but we can see in the medium term, with, one, the U.S. dollars stabilizing, there's now been interest rates being reduced by the Fed. Secondly, our trade deficit narrowing a little bit, and we've seen that we plan in the medium term to see more growth of exports. There's a new industrial policy that's been adopted by government. The National Strategy for Transformation Phase 2 has very ambitious goals on increasing exports, doubling them in five years, increasing foreign direct investments. And those are, you know, strategies in the right direction to make sure that our currency, because of inflows of foreign currency that we will have in the country, to stabilize the exchange rate of our currency. And I think, although we've seen pressures on the foreign exchange market, but that is to be expected. We are in a liberalized, or I would say floating exchange rate. So market forces play, but volatility is to be expected. But as a central bank, we always intervene when we see that there's a sudden increase in demand, but also continue to build our foreign exchange reserves. And we ended the year 2024 with very high level of reserves, covering 5.4 months of imports, which is higher than the four months of imports coverage that we have every year. So we are confident that the different measures taken will stabilize our currency as well versus the dollar.
Theme: Rwanda's Economic Growth and Stability
Rwanda's newly appointed Governor Soraya Munyana Hakuziyaremye is optimistic about the country's economic growth trajectory, with projections exceeding 7 per cent by 2025. In an exclusive interview with CNBC Africa, Governor Hakuziyaremye discussed the robust macroeconomic indicators that signal a resilient and growing economy. In 2024, Rwanda's GDP soared to 8.9 per cent, surpassing the initial projection of 8.3 per cent. This outstanding performance was complemented by a significant drop in inflation rates from 14 per cent in 2023 to 4.2 per cent in 2024. The Governor attributed this success to favorable agricultural conditions and decreasing global commodity prices. Additionally, exports surged by 6.9 per cent while imports remained relatively stable, leading to a reduction in the trade deficit. The evenly distributed growth across key sectors such as services, industry, and agriculture further underlined Rwanda's economic strength. Looking ahead to 2025, Governor Hakuziyaremye emphasized the central bank's commitment to maintaining inflation within the target band of 2 to 8 per cent. She highlighted potential risks, including adverse weather events and geopolitical tensions, which could impact international trade and supply chains. The Governor stressed the importance of continuous monitoring and adjustment of policies to mitigate these risks effectively. Rwanda's financial sector also showcased remarkable resilience, with strong growth in various subsectors and robust financial stability indicators. The banking industry, insurance, microfinance, and pension funds all reported double-digit growth, with adequate capitalization and low non-performing loan ratios. The Governor's outlook for the future includes addressing emerging risks such as climate-related challenges and cybersecurity threats. She outlined proactive measures to enhance resilience, including climate risk assessments and cybersecurity diagnostics. The strategic focus on stress testing and capital buffers will ensure the financial sector's capability to withstand external shocks. Despite challenges in the global economy, Governor Hakuziyaremye expressed confidence in Rwanda's currency stability. She noted the stabilization of the Rwandan franc against the US dollar, with a decreased depreciation rate in 2024. The implementation of new industrial policies and strategies to boost exports and foreign direct investments will further support currency stability. The Governor emphasized the importance of maintaining high foreign exchange reserves and intervening in the market when necessary to manage volatility. With a strong foundation in place and strategic planning for the future, Rwanda's economy is poised for continued growth and stability.
"In 2024 our GDP growth was at close to 9 per cent, 8.9 per cent, which is very robust and also higher than the projections we had... So we are quite happy about that."
['Rwanda economy', 'GDP growth', 'inflation rate', 'macroeconomic indicators', 'financial stability', 'currency stability', 'exports', 'imports', 'central bank', 'economic growth']