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FRW 1000 1000FRW THE BN R RWANDAN BANKER Issue No. 27 August 2016 ISSN 2410-6844 Influence of financial Financial inclusion The real Boost your development on in Rwanda: Exchange rate savings, You Economic growth a good example of and economic too can do it inclusive policies growth AN INSIGHT INTO RWANDA’S MONETARY POLICY 1 BNR BANK NOTES & COINS WITH LEGAL TENDER BNR VISION & MISSION Vision To become a world class central bank Mission To ensure Price Stability and a sound Financial System CORE VALUES: Integrity We uphold high moral ethical and professional standards for our people, systems and data. Accountability We are results focused and transparent and we reward according to performance. Mutual-respect and Team-work We keep ourselves in high spirit, committed to each other for success. We are mindful of our risks and we optimise our resources to achieve more with less cost: time, money, environmental and otherwise. Effectiveness We take more interest in the impact of our actions 2 BNR BANK NOTES & COINS WITH LEGAL TENDERThe Rwandan Banker August 2016 W 1000FR 1000FRW BN R BNR VISION & MISSION CONTENTS EDITORIAL TEAM inside this issue OWNERSHIP: National Bank of Rwanda Vision To become a world class central bank 06 26 MANAGEMENT An insight into Rwanda’s Rswitch expanding the National Bank of Rwanda monetary policy financial services ecosystem CHIEF EDITOR Mission Prof. Thomas Kigabo Rusuhuzwa (Chief Economist To ensure Price Stability and a sound Financial System National Bank of Rwanda) 12 28 EDITOR Redressing cyber Doreen Makumi The Real Exchange rate vulnerabilities starts (Corporate Communications Expert and Economic growth with the C-Suite National Bank of Rwanda) CORE VALUES: CONTRIBUTORS: Prof. Thomas Kigabo Rusuhuzwa 14 32 (Chief Economist Integrity Boost your savings, Behind a successful leader National Bank of Rwanda) you too can do it lies a dedicated assistant…. Christian Manishimwe We uphold high moral ethical and professional standards for our people, systems and data. (Senior Economist National Bank of Rwanda) 18 34 Bruno Mwenese Accountability Financial inclusion in Redressing cyber vulnerabilities (Senior Economist Rwanda: a good example starts with the c-suite National Bank of Rwanda) –where do you stand? We are results focused and transparent and we reward according to performance. Of inclusive policies Wilson Kamali (Director Statistics National Bank of Rwanda) Mutual-respect and Team-work We keep ourselves in high spirit, committed to each other for success. 06 10 12 18 We are mindful of our risks and we optimise our resources to achieve more with less cost: time, Pascal Munyankindi money, environmental and otherwise. (Manager Monetary Policy 22 36 National Bank of Rwanda) Influence of financial The State of Custmer Doreen Makumi Sector development on care at BNR (Corporate Communications Expert Effectiveness Economic growth National Bank of Rwanda) Josiane Ingabire We take more interest in the impact of our actions (Personal Assistant to the Governor National Bank of Rwanda) NDAYISENGA Simon Pierre (Ass. Off. PR and Customer Care National Bank of Rwanda) 3 The Rwandan Banker August 2016 FRW 1000 1000FRW BN R Want to Secure your future Invest? in Treasury Bonds. An insight into Rwanda’s monetary policy Central banks have a crucial role to ensure economic and financial stability. They conduct monetary policy to achieve low and stable inflation. To achieve their objectives, Central banks need clear policy frameworks. The Governor of the National Bank of Rwanda, Hon. John Rwangombwa discusses the National Bank of Rwanda’s Monetary and Exchange Rate Policy for the last five years and how it has helped the Bank achieve its mandate. The Rwandan Banker August 2016 entral banks have a crucial role to ensure economic and financial Cstability. They conduct monetary policy to achieve low and stable inflation. And to achieve their objec- tives, Central banks need clear policy frameworks. The Governor of the Na- tional Bank of Rwanda, Hon. John Rwangombwa discusses the National Bank of Rwanda’s Monetary and Exchange Rate Policy for the last five years and how it has helped the Bank achieve its mandate. able inflation that does not pose challenges to the private sector. It implies that the general price level of goods and services in an economy is kept at a moderate level, say for example, annual inflation of around 5% in the medium term. Q&A When inflation is too high, it Q Hon Governor, we hear cen- repos and treasury bills to mop erodes the purchasing power of tral bankers talk about the up the surplus liquidity out of economic agents as fewer goods monetary policy, what exact- the economy and vice-versa. can be purchased using the ly does this term mean and Likewise, the central bank can same amount of money than what is its role in economic increase the supply of money by before. Once prices are chang- stability? for example encouraging com- ing too often, households and mercial banks to extend credit firms find it hard to make prop- A Monetary policy refers to the to the private sector to finance er consumption and investment strategy or course of action tak- the economy when there is no plans. Therefore, price stability en by the central bank to regu- risk of pressures on inflation. reduces economic uncertainties late the amount of money in the and creates an enabling envi- economy normally known as ronment for economic growth to liquidity, with the objective of Q There has always been a flourish. controlling inflation and influ- consensus that the main con- encing economic growth. tribution of Central Banks Q For any central bank to ef- in Economic Management is fectively achieve its mandate, Liquidity may include credit, Price Stability. Why is price it must have instruments cash and checks, among others. stability considered a core ob- that help in the implementa- When the central bank wants jective of any Central Bank? tion of its monetary policy. to reduce inflation for example, What instruments are mostly it uses its instruments such as A Price stability in simple terms used by BNR to implement its means low, stable and predict- monetary policy? 6 The Rwandan Banker August 2016 BNR uses various instruments it changed from 8% due to the ment an accommodative mon- to achieve the targets set in the liquidity shortage that was in etary policy during the last 5 monetary policy program. These the banking sector at the time years by keeping the central instruments include open mar- due to the effects of the global bank rate (Key Repo rate) at a ket operations, BNR interven- financial crisis. low level. tion on foreign exchange mar- ket and reserve requirement. The BNR’s Monetary Policy Q In attempts to curb infla- Committee (MPC) decided to When we talk of open market tion and protecting the pur- reduce the Key Repo Rate to operations, we mean interven- chasing power of the Rwan- 6.5% in June 2014, the lowest tion on the money market to dan Franc, how does the level since November 2011. As mop up or to inject liquidity in monetary policy fare/ per- a result, economic financing by the banking system in order to form in allowing increased the banking sector improved as keep the reserve money at the output of goods and services new authorized loans increased desired level. in the economy? by 22% on annual average, total outstanding loans to the private In other words, after estimat- A The National Bank of Rwan- sector increased by 23% per an- ing the level of liquidity needed da has managed to keep infla- num while total liquidity in the in the economy (i.e. money de- tion low and stable especially economy increased at 19.2% mand), different instruments within the context of the East in the last five years. However, are used to keep money supply African sub-region. In the Jan- the global economic conditions closer to it as significant devia- uary 2012-June 2016 period, have continued to be a chal- tions between the two monetary mean headline inflation for lenge for many central banks. aggregates (money demand and Rwanda stood at 3.8% com- money supply) may be a source pared to 7.3% for Uganda, 7.1% In the Rwandan case, the con- of inflation. for Kenya, 8.6% for Tanzania tinued strengthening of the and 8.7% for Burundi. In terms USD and the decline in export In practice, BNR adjusts its Key of stability, standard deviations earnings may continue to exert Repo Rate (KRR) to signal to the show that inflation was more pressure on the FRW exchange market the desired monetary stable in Rwanda (2.0%), fol- rate and increase the exchange policy stance. Open market lowed by Kenya (3.0%), Tanza- rate pass through to domestic operations include repos or re- nia (4.5%), Uganda (5.8%) and prices. In the short run, this verse repos operations, treasury Burundi (6.1%). may call for a more prudent bills issuance, standing depos- The stability in inflation and in monetary policy to continue en- its facility, standing lending fa- the value of the FRW supported suring macroeconomic stability, cility and the discount window. economic growth as Rwanda re- keeping inflation low and stable corded real GDP growth rate av- and encouraging the banking Foreign exchange intervention eraging 8% over the last decade. sector to finance economic ac- on the other hand, is a sup- tivities. plementary instrument that The National Bank of Rwanda smoothens unexpected liquid- started implementing an accom- On the other hand, Rwanda ity fluctuations in the market. modative monetary policy since has experienced good develop- BNR intervenes in the foreign June 2013, thus contributing to ments of the financial system in exchange market in order to re- the recent good performance of the last decade such as the ex- duce the exchange rate volatil- the Rwandan economy at a time pansion of the banking sector, ity.

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