Global Central Bank Governors convene in Washington

The National Bank of Rwanda, Governor Francois Kanimba, has just returned from a Washington meeting with other Central Bank Governors from across the globe, who attended the Annual Board of Governors meeting of the World Bank Group on Monday, The New Times can reveal. Confirming the visit the Secretary General in the Ministry of Finance, John Rwangombwa, told The New Times, in an exclusive interview, that Rwanda and other developing countries will not face immediate repercussions of the global financial crisis currently causing the collapse of banks and other financial institutions in the United States of America (USA) and Europe. On Kanimba’s meeting in Washington, Rwangombwa explained that the most powerful financial institutions, the International Monetary Fund (IMF) and World Bank (WB) presented their concerns on the current state of affairs in the international financial industry. “Currently we (Rwanda) have no problem. This is basically because we have no pronounced financial markets so far,” he explained. He, however, added that the crisis would affect international trade in general. “Our international manufacturers and importers mostly get financed by the institutions that are now affected by the crisis. So we might have a situation where the cost of our imports goes up badly and this has dangerous implications for our balance of payments,” he explained. Rwangombwa explained that a country’s balance of payments is unfavourable if that country pays more for its imports than it earns from its exports. “This means that revenue from exports cannot be sufficient enough to pay for imports. This is a bad situation especially for developing countries like Rwanda that mostly rely on imports for most factors of production in the economy,” he said. He added that the crisis could also have wider implications on the flow of aid from developed countries to developing ones which crucially need donor assistance in their development programmes. “The recent decision by the US to inject US$700 billion is likely to affect their budget for aid. However, on a positive note, the crisis could reduce oil prices which is good for us,” he pointed out. Addressing the governors on Monday, Robert B. Zoellick, World Bank Group President, said that the world is currently at an extraordinarily difficult time – a time of uncertainty and insecurity, with a danger that fears posed by the financial crisis would push the global economy away from – not towards – a more inclusive and sustainable globalisation. He said that 2008 was a precarious year worsened by a meltdown in financial, credit, and housing markets on top of the continuing stress of high food, fuel, and commodity prices. Since the beginning of the year, there have been violent protests in South Africa, Ivory Coast, Egypt, Chile and Kenya, with citizens protesting against central governments on high costs of food items and fuel. Zoellick said that developing countries will suffer from a continuing drop in exports, as well as capital inflow, which will trigger a falloff in investments. Deceleration of growth and deteriorating financing conditions will trigger business failures and increase the risk of banking emergencies. Some countries will slip toward balance of payments crises. Regarding the limited and contrasting nature of the international aid system, Zoellick said: “Donors bring ideas, energy, and resources, but they also can overwhelm national ownership by developing countries, harming the effectiveness of aid.” It is during the same time and in the same city that the ministers of finance from the G8, a group of the richest nations in the world and the ones responsible for the largest contribution to donor aid, were also holding their annual meeting. Ends