Rwandan Franc has remained weak due to increasing demand for the forex as businesses reopen gradually.
There are concerns that the franc could depreciate further as the country imports more commodities to recover from the pandemic.
By Wednesday, the Rwandan franc was trading between Rwf1,028 and Rwf1030 against the dollar from Rwf977 and Rwf994 during the same period last year. Forex traders say a sharp increase in the foreign currency demand has been widely felt on the market despite the limited supply of the currency.
“The cost has increased from Rwf1,025 against the dollar in one month. That is not normal in our business. The demand is increasing, and the supply is shrinking. We also think the situation is caused by banks that have high exchange rates so clients flock to forex bureaus,” said
Vianney Gasana, vice chairman of Rwanda Forex Bureau Association. The government recently eased Covid-19 guidelines after the country recorded a decline in infections. Social gatherings, public events, and businesses are allowed to resume and operate until 11 pm.
The comeback, according to forex bureaus, boosted the demand for forex.
According to the latest National Bank of Rwanda’s annual report for the fiscal year 2020/2021, compared with the previous year, the Rwandan Franc further weakened in the year ending June 2021 owing to the “economic activities and rising imports to cater for Covid-19 related needs,” Mr Gasana told Rwanda Today that the situation might worsen in coming weeks when China reopens its market from the Spring Festival holidays.
“Rwandan Franc depreciation is likely to fall further when the demand for forex increases next week when the Chinese market opens. The demand we have today will certainly increase because businesses will want to travel to China,” Mr Gasana said.
According to the central bank’s report, year-on-year, the franc depreciated by 5.3 percent against the US dollar, higher than 4.3 percent recorded in June 2020. The Franc also weakened against the British Pound, Euro, and the Yen, losing 18.6 percent, 11.5 percent and 2.7 percent respectively compared to 1.3 percent, 3.2 percent and 4.3 percent losses in the year ending June 2020.
In East Africa, the Rwandan franc weakened against all regional currencies in 2020/2021, mirroring their behaviour compared to the US dollar.