As Rwanda braces for a lockdown, closed boarders, grounded aircraft all aimed at preventing the spread of the deadly coronavirus, there is a significant effect on the economy.
Taarifa brings you details on how the central bank is prepared for this emergency situation.
Rwanda Central Bank Governor John Rwangombwa on Sunday appeared on Kiss FM, a local radio station, and dissected the level of preparedness.
By Saturday night Rwanda government had issued a directive requiring most hotels, business, shops and markets be closed. “We are trying to monitor channels through which the economy is likely to be affected. Things are changing every day. People have lost jobs because of business closure,” Rwangombwa noted during the interview.
Asked on what is the current level of impact inflicted onto the economy by this pandemic, the Governor said, “We can’t have a direct assessment of the size of impact,” the governor said, adding it will depend on how long this situation will drag on.
“Rwanda has a strong financial institution and could survive the effects of the Coronavirus pandemic. By March all banks had bigger capital base,” Rwangombwa said.
In the months of March and April, Rwanda was expected to host several meetings but they have since been cancelled because of the deadly Coronavirus pandemic.
According to the Governor, this cancellation has created a loss of a total $8million equivalent to 10% of the anticipated revenue from MICE in 2020.
Rwanda had scheduled this year to host 147 international conferences under the Meetings, Incentives, Conventions, and Exhibitions (MICE). Government had projected to fetch $88million from these conferences.
Meanwhile, Rwangombwa said the Central Bank anticipated that banks might get affected with short term liquidity challenges because of this pandemic. “That is why we put in place liquidity window to allow the banks continue serving their customers.”
“If depositors want to pick their money, banks should be able to give them their cash. By end of year banks had no liquidity challenges,” he said, “And unless this crisis is prolonged, there should be no challenge at all.”
He explained that the Central Bank anticipated that customers with bigger loans would face challenges in servicing those loans thus creating liquidity problems to the banks. This is why banks are required to engage their customers and re-negotiate terms.
Stimulus Package
According to Rwangombwa, more than 80% of the liquidity in local banks is generated from domestic market. With businesses slowing down, deposits coming to banks will decline. “We also are going to see a decline in loan servicing and that’s why Central Bank has issued a stimulus package.”
He said the stimulus, which is at the discretion of the Central Bank, is meant to relax measures on loan and giving clients some room to breath.
The package is also meant to facilitate banks with generally their liquidity issue.
There are no anticipated risks, except when the pandemic is prolonged. “This measure is in view that this crisis does not go beyond six months,” he said.
“We are in this together,” he said. “The idea is to see that this crisis does not have a negative impact on the economy.
The governor said some businesses, such as telecoms have forfeited their revenues in view of contributing to protecting the economy from the effect of the Coronavirus crisis.
Forex
It is not easy to quantify the impact of crisis at the moment. We don’t know anything yet. The Franc has not yet been affected due to decline in import, which had put pressure on the currency in previous months.
“We anticipate a depreciation of the Francs after the crisis, because there will be an increase in exports,” Rwangombwa said.
The Central Bank doesn’t anticipate any much changes on the Forex market, but there will be a delayed impact which might be felt after the crisis in the short term.
After effects
After the pandemic, if some businesses begin feeling the effect and if the crisis is much bigger, with a committee conducting an assessment, government will be advised on how to address the matter.
Central Banks expects banks and customers to continue talking.
The central bank doesn’t think customers should rush to the banks now, “but we know that if this crisis continues, then banks should be able engage clients.”
