Red Sea disruption raises inflation risks - Rwandan Central Bank Governor John Rwangombwa

By Esther Muhozi
On 17 January 2024 at 03:10

John Rwangombwa, the Governor of Rwanda’s Central Bank has highlighted the inflationary concerns arising from the disruption in the Red Sea.

Rwangombwa made the disclosure on Tuesday during an interview with CNBC on the sidelines of the World Economic Forum in Davos, Switzerland where he expressed particular worry for countries heavily reliant on imports.

Rwangombwa stated, "The issue of the sea is being seen as a challenge and risk to businessmen. If it persists, it might aggravate transport costs, which could increase prices in the market."

However, he remains optimistic, stating, "I believe these challenges will be overcome."

During the interview, Rwangombwa shared his areas of interest at the forum. He mentioned attending the session on the financial sector, as he is keen on understanding the impact of technology in that domain.

Additionally, he expressed interest in discussions related to non-bank financial institutions and financial inclusion, aiming to grasp their influence on the financial sector and overall quality of life.

When asked about the future of banks in Rwanda, Rwangombwa acknowledged the numerous challenges the industry faces. He emphasized that banks are actively responding to these challenges, such as climate change, cyber security, and digital revolutions.

He noted that banks are investing heavily in digital operations and striving to reach the lowest levels of the population with banking services. He also mentioned concerns about the transition to a green economy and the impact on financial institution stability.
Rwangombwa stated, "We are all engaged in this and happy to be here and learn from the experts."

Projection of economic performance

Governor Rwangombwa provided insights into Rwanda’s economic performance projections. He highlighted the strong global growth rate, with an average of 8% for a considerable period that Rwanda has performed. The projection for 2023 was 6.2%, down from 9.2% in 2022.

He believes that a growth rate of 6.6% is attainable in 2024, provided the risks are mitigated. He acknowledged the impact of agriculture on the economy, stating, "Regardless of the good performance of the economy, agriculture did not perform well in the past two years, which affected inflation. However, the current season is doing well."

Rwangombwa expressed confidence in Rwanda’s resilience and strength, mentioning the country’s reliance on commercial financing and its alignment with achieving financial goals through Development Finance Institutions (DFIs).

John Rwangombwa, the Governor of Rwanda’s Central Bank.