Rwanda’s financial sector remains resilient amid COVID-19 pandemic shocks

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An once busy street is empty during a lockdown in Kigali, capital of Rwanda, July 17, 2021. The Rwandan government on Wednesday announced that movements in Kigali and eight towns will be prohibited from July 17 to July 26, due to the surge in COVID-19 cases. The public are not permitted to leave home except for essential services during the lockdown. (Xinhua/Cyril Ndegeya)
An once busy street is empty during a lockdown in Kigali, capital of Rwanda, July 17, 2021. The Rwandan government on Wednesday announced that movements in Kigali and eight towns will be prohibited from July 17 to July 26, due to the surge in COVID-19 cases. The public are not permitted to leave home except for essential services during the lockdown. (Xinhua/Cyril Ndegeya)

Rwanda’s financial sector remains resilient and stable amid COVID-19 pandemic shocks on the backdrop of strong economic growth, the National Bank of Rwanda said in its Monetary Policy and Financial Stability Statement (MPFSS) 2021, which was released here Tuesday.

The financial sector has demonstrated its strength and resilience amid the challenges posed by the COVID-19 pandemic, said John Rwangombwa, governor of the National Bank of Rwanda, at a news conference in Kigali, the Rwandan capital, citing an assessment by the bank’s Financial Stability Committee.

“The financial sector continues to expand and assets grew by 19 percent in December 2021. Financial sector assets now stand at 68.8 percent (of) GDP,” said Rwangombwa.

He noted that the growth in both the banking and microfinance institutions sectors was mainly driven by the growth of deposits, capital injections and profits.

According to Rwangombwa, banks continue to hold sufficient capital to absorb losses and support intermediation activities.

Maintaining capital buffers above the regulatory minimum increases bank resilience to potential losses, Rwangombwa said, claiming that money market rates were steered around the central bank rate as a result of effective monetary policy implementation.

The lending rate declined to 16.18 percent and the deposit rate increased to 8.05 percent in 2021.

According to the central bank, headline inflation decelerated to 0.8 percent on average in 2021 from 7.7 percent recorded in 2020.

The bank said that the growth in Rwanda’s economy in 2021 was supported by the government’s economic recovery plan, sizable support from fiscal and monetary policies, the easing of containment measures and the increased vaccine rollout.

Rwanda recorded a growth of 10.9 percent in the economy in 2021, according to a recent report by the National Institute of Statistics of Rwanda (NISR).

The NISR report for the year 2021 said that the sustained recovery during the second year of the COVID-19 pandemic managed to reverse the 3.4 percent contraction recorded in 2020. Enditem

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