Inflation remains one of the biggest economic challenges Rwanda has been dealing with since last year, with the price of goods and services skyrocketing -a phenomenon most countries have been grappling with since the Covid-19 pandemic and the start of the Russia-Ukraine conflict.
Today, there is worry about the inflation spiral could result into more economic difficulties for citizens, with workers are more likely to seek higher wages to maintain their standard of living and cope with increased prices of goods.
To mitigate this challenge, the Ministry of Finance and Economic Planning, in collaboration with, GIZ and Economic Policy Research Network (EPRN), organized a Public-Private Policy Dialogue aimed at shedding light on the patterns and drivers of inflation , but also discussed ongoing containment measures.
The one-day event brought together monetary, fiscal, trade, and agriculture policy analysts, as well as members of the private sector. It was held in Kigali City on February 23.
According to the treasury officials, poor local agricultural output and persistent economic difficulties worldwide—primarily brought on by Russia’s war in Ukraine—are all contributing to rising inflationary pressures.
The Central Bank Rate (CBR) was consequently raised from 6.5% to 7.0% by the MPC, with inflation, currently at 20.7%. Although it is anticipated that inflation would decline at the end of this year, the most recent forecast indicates that there won’t be any significant shocks in 2019.
“The Government of Rwanda is acutely aware that high inflation is imposing significant hardship, straining budgets and shrinking what paychecks will buy. We are therefore gathered here to discuss efforts and progress of policymakers towards restoring price stability to Rwanda’s economy for the benefit of the Rwandan people,” Dr. Patrick Hitayezu, the Chief Economist at the Ministry of Finance and Economic Planning said.
“The government has put in place measures to prevent an increase of prices resulting from speculation. We are here today to discuss that and the private sector understands that. Private sector will also discuss that in their associations,” Hitayezu added.
In reaction to these inflationary pressures, the Government employed a multipronged approach to curb inflation.
For example, to safeguard the gains in economic recovery, the National Bank of Rwanda has been proactively implementing monetary policy measures to stabilize prices. These include raising the Central Bank Rate (CBR) by 250 basis points from 2022 to mute demand pressures.
Speaking at the forum today, Dr. Thierry Kalisa, the Chief Economist at the Central Bank noted that inflationary pressures will remain in the coming months before easing, leading inflation to come down to the target band below 8% by the end of 2023.
To manage the food supply shocks that triggered food price hikes all over the country, the Ministry of Agriculture and Animal Husbandry has been implementing targeted measures including scaling up irrigation schemes, increasing land under consolidation, subsidization of agriculture inputs such as fertilizer and seeds and increasing seasonal fertilizer and seed use.
“The food price increases will be solved by large production, using technology in farming. There should be a balance, wages, jobs and prices of commodities on markets,” Jean Claude Shirimpumpu, a livestock farmer said.
“You cannot increase wages of workers and keep the same production. They have to be simultaneously done, if necessary. We have to produce as much as possible, this means now technology is needed.Possibly, large Irrigation in agriculture and technology in livestock farming,” he added.
To contain imported inflation, the Ministry of Trade and Industry intensified efforts to contain speculative tendencies and conduct inspections, while diversifying import sources for major foodstuffs such as sugar and cooking oil and increasing domestic production capacity of essential goods such as bar soaps and cooking oil.