Adaptability to modern realities of technology, global interconnectedness and shifting economic paradigms is critical for central banks to remain relevant and deliver on mandates, said John Rwangombwa, Governor of the National Bank of Rwanda (NBR). He was addressing African central bankers, government officials, academicians, members of international organisations, and private sector members during NBR’s 60th anniversary celebration themed ‘The Evolving Role of Central Banks’, on June 7. It featured discussions reflecting on how the central bank has evolved over the years with a focus on financial and monetary stability, financial inclusion, public-private partnership, climate change, and the future of central banks, among others. ALSO READ: Central bank to mark 60 years of economic responsibility in Rwanda Rwangombwa noted that the bank has undergone a transformative journey of evolving monetary policy framework that enabled it to play a pivotal role in the economic development of the country. “We transitioned from direct monetary policy controls that utilise instruments like credit ceilings, sector credit allocation, regulated interest rates, and exchange controls to market-oriented policy instruments,” he said In 2019, the bank transitioned to a price-based monetary policy framework for better achievement of inflation goals, he added, highlighting that prior to recent global challenges, Rwanda economic performance was strong. This is evident with the maintained inflation average of 5.9 percent amidst the 2008 global financial crisis, he pointed out. ALSO READ: Central bank, financial institutions must boost stance against emerging risks - PM Ngirente Financial stability, inclusion Rwanda's financial landscape grew from seven financial institutions before 1994, to the current 11 banks, 461 microfinance institutions, 12 pension schemes, 18 insurers, 33 payment service providers, 78 foreign currency dealers, 50 non-deposit-taking financial institutions, and a credit reference bureau. Consequently, the financial sector assets saw a 21-fold increase, rising from Rwf500 billion in 2006 to Rwf10.5 trillion in 2023, while credit to the private sector increased from Rwf177 billion to Rwf4.2 trillion in the same period. Rwangombwa said that the central bank adopted international regulatory standards transitioning from prudential regulation to a risk-based regulation. “In an era of rapid technological advancement, global interconnectedness, and shifting economic paradigms, central banks must continually adapt to ensure price and financial stability as well as promote sustainable economic growth,” he noted. This, he said, will ensure they remain relevant and effective in fulfilling their mandates in light of new responsibilities. Key, among other mandates that the central bank has, is to promote financial stability and play a leading role in enhancing financial inclusion. Victoria Kwakwa, the World Bank’s Vice President for Eastern and Southern Africa, observed that monetary policy stability has enabled sustained investments, thanks to the role that central banks have played. However, she indicated that this is happening at a time when many African countries face broader macroeconomic challenges, slowing growth, high borrowing costs, debt distress and limited access to private finance in an increasingly uncertain global landscape. Despite all that, the continent still needs huge financing to propel its economic growth, with the United Nations estimating that Africa needs about $1.3 trillion annually to achieve its Sustainable Development Goals (SDGs) by 2030. The former World Bank Rwanda Country Director said that Rwanda has seen substantial progress in digital financial inclusion over the past 10 years, marking the potential for technology and innovation to bridge the gaps and how public-private collaboration must drive financial inclusion initiatives. Going forward, Kwakwa said that there are three key financial inclusion priorities including closing the remaining gap in access across and within countries, accelerating transition to having access to frequent usage of financial services, and investing in digital public infrastructure.
