Britain’s exit from European Union is unlikely to have any adverse impact on the Rwandan economy, central bank governor John Rwangombwa has said.
Last week, UK voters went to the polls for a referendum to determine whether the country would remain part of the European Union (EU), with a majority 52 per cent opting to leave the European bloc.
The referendum outcome sent shock waves across the globe, with the UK’s currency, Pound Sterling, suffering heavy depreciation against the US Dollar and major UK firms seeing their value tumble on the stock market.
However, Rwangombwa allayed fears of the impact of the move to Rwanda’s economy, citing low linkage to the British economy.
“Our economy is not fully linked or integrated with the UK economy, but there are still unknowns as to what extent this might affect the global economy. We expect to have an indirect impact though we cannot say to what extent,” he said.
The central bank governor was yesterday speaking at a news conference following the Monetary Policy and Financial Stability Committee Meetings.
“The biggest impact would be on our reserves, but the good thing is that we do not have much reserves in the currencies that have been hit such as the Pound Sterling, which has depreciated by about 10 per cent,” he said.
Rwanda’s reserves in the Pound Sterling is 1.1 per cent, while with the Euro its only 0.2 per cent of the total reserves. A majority of Rwanda’s reserves are in the US Dollar, at 83.2 per cent.
The impact on trade would stem from the drop in consumption of imports in the economies facing challenges.
However, Rwanda’s trade ties with the UK are relatively low.
“Our trade with UK directly is about 2 per cent of exports and 1 per cent in imports,” Rwangombwa said.
Indirectly, however, the impact could be with the EU as exports to the bloc stand at about 20 per cent.
On impact on investment, the governor said that Brexit’s the impact on certain economies could reduce their appetite and capacity to invest outside.
“We do not know yet but so far we do not have much investment to that end. The biggest concern would be how it will affect the already weak global economy. These challenges of commodity prices linked to a weak global economy, these might prolong its recovery,” the governor said.
Rwangombwa added that the Rwandan economy and financial sector remain sound and stable with the central bank maintaining the key repo rate at 6.5 per cent.
The New Times