Rwanda’s monetary policy, currency issuance, financial institution regulation and supervision, and monetary and financial system stability are all the purviews of the National Bank of Rwanda, the country’s central bank. The financial institution initially opened its doors in 1964. John Rwangombwa now serves as the central bank’s governor.
These other articles might interest you:
Location
Kigali, Rwanda’s capital and largest city is home to its headquarters. Bank headquarters are at 01°56’56.0″S 30°03’49.0″ E. (Latitude:-1.948889; Longitude:30.063611).
Overview
The Bank is a prominent participant in the Coalition for Financial Inclusion, an organization dedicated to advancing policies that broaden access to financial services. Also, it was one of the initial 17 regulatory bodies to announce national pledges to financial inclusion under the Maya Declaration at the 2011 Global Policy Forum held in Mexico. The National Bank of Rwanda is responsible for establishing and enforcing monetary and exchange rate policies that promote long-term economic growth and development in Rwanda. Assuring the country of stable prices and a reliable banking system. To ensure the stability of the financial system, it also seeks to expand access to financial services while keeping financial institutions under watch.
In January 2019, the National Bank of Rwanda (BNR) transitioned to a price-based policy framework as part of a modernization of monetarism.
Financial regulation
The BNR has used a target money supply approach to monetarism for the last two decades, ending in December 2018. By keeping broad money aggregate consistent with inflation and growth targets, it was able to keep inflation low and stable under the monetary targeting framework.
After five years of planning, in January 2019 the National Bank of Rwanda switched its cash policy framework from a focus on quantity to one based on prices.
Scrapping of the old monetary policy
While the price and macroeconomic stability attained under the monetary targeting system were admirable, new obstacles were emerging due to the continuous economic transformation in both financial sectors. As a result of changes in the domestic financial system, the bank has noticed a trend among economic actors toward greater consideration of interest rates when making decisions about consumption. As a result of these tendencies, more individuals and businesses are investing in government securities and increasing their term deposits. A more proactive monetary policy, one that uses the interest rate as an operating target to direct market expectations, became the most pertinent framework under such conditions.
Price-based monetary policy has many benefits over quantity-based monetary policy, including more predictability. One benefit of a price-based monetary strategy is that it does not depend on maintaining a constant ratio of money supplies to inflation. Second, the public and market participants have a firm grasp on the concepts of money price and inflation allowing for clearer communication, more openness, and more responsibility from NBR.
New monetary policy framework
Implementing the price-based monetary policy framework calls for, among other things, a developed financial market, improved communication, and updated monetary policy procedures. To predict future events, it employed econometric models.
The NBR put a lot of resources into training and education for its employees during the interim. The bank built models with help from a wide range of outside parties, including non-governmental organizations and other central banks. It used price expectations surveys (PES) to bolster evidence-based analysis and hence the accuracy of the forecasting models. PESs are held quarterly, in sync with the MPC’s schedule of events.
Major component
A fundamental component of a price-based monetary policy framework is its strategy for communicating with the public. Through press conferences, news releases, and other publications. It informs the public regularly about its policies and choices, the reasoning behind the decisions, the anticipated implications of the decisions, and significant macroeconomic indicators to raise expectations. Those who will receive this information are members of the general public, those working in the financial industry, think tanks, the media, young people, academics, government officials, and international organizations.
As its mission, fostering growth in financial markets is a top priority for the Bank.
Intending to bolster interbank market operations and, by extension, the monetary policy transmission mechanism. It formed a Financial Markets Operations Committee (FMOC) to enhance daily liquidity management and steer NBR interventions on the money market.
With this view in mind, it also organizes quarterly meetings with the treasurers of commercial banks to discuss market trends and analyses.
