National Bank of Rwanda Governor has called for expeditious liberalisation of the financial sector saying it is in Rwanda’s best interest since it is seeking to be a regional financial hub.
Françoise Kanimba highly praises the situation where free movement of capital should be the rule of the day.
"Based on balance of payment trend analysis since foreign exchange market was opened up, the more you open up the more foreign exchange receipts you realise," he noted.
The governor however hastened to say that government has taken great strides in liberalising the foreign exchange market.
"The current account is fully liberalised and some limits on transfers like medical fees and education has been completely removed because the improvement in governance has removed threats of capital fright," he said.
Kanimba was contributing during a consultation meeting on the East African Community (EAC) Common Market at Hotel Alpha Palace in Kigali
Technocrats were giving their views to Rwandan experts handling matters of the East African Community Common Market negotiations.
EAC partner states experts have been given a deadline of December 2008, to conclude technical negotiations that will pave way for free movement of persons, labour, goods, service and capital within the East African region by 2010.
On the capital account, the central bank boss says BNR still maintains control on capital account operations especially on transfers of foreign direct investments (FDI) and portfolio investment.
The banking sector is currently experiencing an all time growth, attracting international investors.
The governor says that Rwandan banking law has made considerable progress in liberalisation as it does not set restrictions for foreign companies to open branches in the country.
He however says that liberalisation will continue to complicate monetary policy management as Rwanda integrates into the regional banking sector. This is mainly due to variations in interest rates among partner states.
Rwanda’s Ambassador to the Great Lakes region, Dr. Richard Sezibera said, "It is clear that service liberalisation has both positive and negative impacts. Rwanda would be successful if it is able to reap the benefits of liberalisation whilst controlling and suppressing the harmful effect that could result."
The country’s priority sectors to be liberalised include; financial services, ICT, transport, tourism, logistics and distribution service.
In the financial sector, liberalisation will cover three areas; full liberalisation of the foreign exchange market, the banking services and the insurance sector.
Kanimba suggests that, since the country has already opened up, stronger efforts for restructuring the financial sector should be sought saying liberalisation will create more mergers.
The Executive Director of Rwanda Capital Markets Advisory Council, Robert Marthu said that integration will increase and grow the wealth of the nation.
According to Rwanda National Office of Tourism and National Parks (ORTPN), liberalisation of the tourism sector will mean harmonisation of tourism services and standards.
"It would also attract more visitors into the country with a "borderless" tourism policy, improvement in the services delivery with easy access of skilled workforce and harmonisation of tourism product prices," said Emmanuel Werabe, an official from ORTPN
With the Ministry of Infrastructure looking at the transport sector drive the country to achieve the Economic Development and Poverty Reduction Strategy (EDPRS) objectives, liberalistion of this sector would be of great benefit. The country has a very dense road network meaning very part is accessible by road.
Jean Kanyamuhanda believes that opening up would expand existing transport links and establish new ones including roads, railways, airports and pipelines.
However Kanyamuhanda says that Rwanda’s weakness is the institutional capacity due to lack of adequate qualitative and quantitative human resources and long absence of effective sector planning.
Director General of Rwanda Civil Aviation Authority Lt. Col Dr. Richard Masozera said that liberalisation is the only definite way forward for countries that have not been able to sustain their national carriers due to financial and other pressures.
Liberalisation ensures that there are adequate air transport services in the absence of a national airline.
He however noted that the establishment of a new air carrier in a very thin market like Rwanda raises the need for protection of the carrier particularly in the early stages of its development.
"Full liberalisation may therefore hamper rather than assist the growth of such an airline," he said.
He adds that in this case, Rwanda has to be resolved in the future of its air carrier policy and it may be prudent in agreements where Rwanda participates to pay closer attention to negotiating appropriate exemptions and moratoria albeit for limited periods.
This comes at a time the service sector has been a significant driver for growth in the country especially in wholesale and retail trade, transportation and professional services
The services sector growth last year was recorded at 9.2 per cent compared to 8.1 percent in 2006.