I think it’s natural for us to express our concerns, and rightly so, about the fact that the value of the Rwandan Franc is decreasing against the US dollar (making imported commodities more expensive).
But we should also recognise that in today’s world the “interconnectedness” of countries’ economies (specifically trade), makes it impossible for a central bank to have complete control over currencies’ exchange rates.
The conventional way of keeping a currency from dropping against another on the markets is for the central bank to start buying a portion of it (making it “rarer” so to speak and therefore more expensive, so re-appreciating its exchange rate).
However, would the current situation really justify such a move, recognising that there’s a whole array of consequences that come with it (reserves at central bank, etc.)? I’m just trying to think aloud.
Let’s be re-assured by the fact that, according to financial and business actors, part of the Franc depreciation we are currently witnessing is not structural but is driven by end-of-year trade activities. We hope there will be some level of rebound/adjustment after the festive season.
Reaction to the story, “Declining franc no cause for alarm, says central bank”, (Business Times, October 1)