A woman spins raw silk yarn at a factory in Rwanda, January 19, 2009. REUTERS/Hereward Holland

KIGALI (Reuters) – Rwanda’s central bank on Thursday pledged to keep monetary policy “prudent” to safeguard against stubborn inflationary pressures which have triggered sharp rises in interest rates and public anger in neighbouring African economies.

Rwanda has had a better run on inflation than other countries in east Africa, including Kenya, Uganda, and Tanzania where double digit inflation and weak currencies prompted authorities to increase interest rates to around 20 percent in some cases.

Inflation in Rwanda will ease to 7.5 percent year-on-year in the central African country from 8.3 percent in 2011, the central bank said in a statement.

“The BNR monetary and exchange rate policy will remain prudent enough to continue limiting the impact of likely persistent regional inflationary pressures,” it said in a monetary policy statement.

The bank also said growth this year would slow to a projected 7.6 percent from a forecast 8.8 percent in 2011.

There was no immediate word on the bank’s key policy rate which it raised by 50 basis points twice in the final quarter of 2011 to a level of 7 percent to prevent inflationary pressures from hurting the economy.

Inflation had been contained at moderate levels mainly due to the improved food production, efficient management of monetary policy, a stable exchange rate which limited the pass-through of imported inflation to domestic market, the bank said.

Inflation appears to have peaked in both Kenya and Uganda and analysts expect a sustained cycle of monetary easing in both soon.

Rwanda’s central bank said gross domestic product in 2011 was spurred by a strong growth in the key agriculture sector, as well as industry and services.

The landlocked country ended 2011 with a positive balance of payments standing at $120 million compared with $72 million a year earlier, helping to build up foreign reserves, official data showed.

“This comfortable external position resulted from a significant increase of official and private capital inflows which continued to offset the structural current account deficit mainly coming from a huge trade deficit, estimated at $1,194 million,” the statement said.

The central bank said it planned to offer a 7-year Treasury bond by the end of February and another bond targeting Rwandans abroad by end-June.

By Graham Holliday

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