East African Business Week

KIGALI, RWANDA -  As Kenya, Uganda, Tanzania and Burundi are grappling double digit inflation; Rwanda has shrugged off the inflationary pressure keeping it in single digits.
 East Africa's biggest economy Kenya October inflation accelerated to 18.9%, in Uganda the rate is at 30.5% the highest for the last 18 years and in Tanzania inflation surged to 17.9% and Burundi at 13%.
Inflation statistics from The National Institute of Statistics of Rwanda (NISR) shows that October inflation rose to 7.76% up from 6.64% in September. In the region, Rwanda has had its inflation decline and its currency shrug off the pressure of imported inflation.
The National Bank of Rwanda Governor Amb. Claver Gatete was quoted by the news agencies saying that they would continue "maintain price stability and reduce inflation - the most important goal."
"There is strong evidence of the continuation of our growth with the economic growth likely to exceed the initial projections of 7 % to 8.8 %," Gatete said.
Rising inflation the region started in Uganda after the fuel and food prices started rising that were coupled with a depreciating shilling on the dollar.
The pressure of rising fuel prices that Uganda companies purchase in dollars meant that there was a trickle-down effect of prices of food and goods that require transportation.
 The Uganda Shilling in the last 12% had depreciated by 24.93% only until three weeks ago when it started easing, and the Kenyan Shilling by 22% whereas Rwanda's franc had only depreciated by 0.9% in the last 12months.
The trend in the performance of Kenya and Uganda's currencies have led to foreign exchange challenges that have also driven the prices of imported commodities up and also invited imported inflation in the two East African nations.
In Rwanda, with the franc only depreciated by less than 1% meaning that prices of goods have remained relatively low explaining why inflation remains low. According to analysts Rwanda made good harvests that kept the managed to keep food prices low and curb inflationary pressures.
Rwanda also depends on imported commodities whose price is higher than domestic goods however due to a strong franc, the prices have been mitigated by the currency to avert imported inflation.
Due to the depreciated units Kenya and Uganda, they have not been able to mitigate the pressures of inflation to keep their prices down.
The Rwandan Franc has also been appreciating on the Kenyan, Ugandan and Tanzanian Shilling by 14%, 15.1% and 9.5% respectively whereas depreciating by 2.4% on the Burundi unit. Part of the contribution to the appreciating currency has been the recent Bank of Kigali IPO that was oversubscribed by over 120%. There was interest in the region for the IPO which created demand for the Franc.
Analysts have also pointed out that Rwanda's monetary and fiscal stance has managed to curb and mitigate inflation.
The fiscal stance was realised when the government reduced pump prices by Rwf100 ($0.16) per litre so as to mitigate the shocks of rising fuel prices.
Kenya also cut taxes on diesel by 20% but this did not help reduce the pump prices but instead created scarcity from the suppliers which gradually dragged the price upwards.
The prices of fuel in Rwanda at the beginning of the year was about Rwf1,067 ($1.75) and has overtime dropped to RWf100 ($1.64).
The Rwandan government achieved curbing the risks of imported inflation that would have brought in by high fuel prices. High pump prices also lead to increased costs of transportation of commodities that are in-turn cause prices to go up.
In the IMF's regional economic outlook, it is quoted that "Monetary policy remains looser than desirable in many countries in the region, even before the surge in fuel and food prices."
"Interest rates have failed to keep pace with the cyclical recovery, and the policy now needs to move ahead of the curve, particularly where output is back to trend paths," reads the report.
Kenya and Uganda seemed to have been treating symptoms instead of adopting a monetary policy that is stifling credit accessibility and according to analysts, this is likely to hurt growth and stifle productivity.
"Do not hurt growth, and hurt it temporarily to curb inflation. We need to look at macro-economic stability rather than constraint credit and instead adopt rationing of credit to some sectors," says Dr Patrick Wakida an economist in Uganda.
Wakida points out that with inflationary levels and limited credit then the level of investments is likely to drop unless there is macro-economic stability. With limited investments, borrowing and supply of food crops to meet the demand then this has escalated the inflation in Kenya and Uganda.