The drop in food production in the country is expected to keep cost of living high in the first half of 2023, even as the economy continues to recover.
Rising food prices, linked to the weak agriculture performance due to unfavorable weather conditions, and strong domestic demand have kept headline inflation above 20 percent in recent months, according to the International Monetary Fund (IMF) figures.
"The high core inflation, at 14.4 percent in February, signals broad based and persistent inflationary pressures in the economy," the IMF said in a statement released on Tuesday.
The National Bank of Rwanda also indicated that though core inflation is beginning to slow down, food prices are likely to remain high.
“We expect inflation to remain high in the first half of 2023, the core inflation had started going down, but due to food inflation the overall headline inflation is expected to remain high in the first half of this year,” said John Rwangombwa, the Rwanda Central Bank Governor during a Monetary Policy briefing meeting.
He said poor agricultural yields in season A accelerated inflation at the beginning of the year, a likely effect continue into the coming months.
He however said if the current rains continue, they might have a positive impact on season B and bring down food inflation in the last part of the year.
“We expect it to go below 8 percent by end of the year, but this will depend on how season B turns out,” said Rwangombwa.
The central bank employed tight monetary policy interventions to curb inflation that was surging with reckless abandon in the last half of 2022.
In February last year, the central bank increased its repo rate from 4.5 to 5 percent but by August as the effects of the war in Ukraine hit the economy, it resorted to increasing it almost every quarter.
“We have been increasing our rate almost every quarter, from 4.5 to 7 percent today to try and deal with the surging inflation” said the governor.
The interbank market rate increased to 7.1 percent in December 2022, the lending rate increased to 16.38 percent, while the deposit rate decreased to 7.66 percent in 2023.