The National Bank of Rwanda is evaluating the issuance of US dollar-denominated bonds on the local bourse as part of ongoing efforts to strengthen the country’s capital market. The development was announced by Central Bank Deputy Governor Soraya Hakuziyaremye, who revealed that a study is underway to assess the risks associated with issuing US dollar-denominated bonds – particularly foreign exchange risks – and potential mitigation measures. “Since these bonds would primarily attract offshore investors, there is a risk of capital flight when investors find better opportunities elsewhere,” she said. “That’s a key factor we are carefully evaluating.” Dollar-denominated bonds can be issued by corporations to attract a broader investor base, offering a larger market while allowing investors to hedge against currency risks and seek higher yields compared to local currency bonds. Hakuziyaremye noted that the assessment is expected to be completed by the end of the 2024/2025 financial year, with further announcements to be made through the Rwanda Stock Exchange (RSE). As Rwanda seeks to establish itself as a regional financial hub through the Kigali International Financial Centre, RSE CEO Celestin Rwabukumba emphasiSed the importance of offering investment instruments in hard currencies to attract foreign investors and capital inflows. “We must provide world-class instruments in the market,” he said, highlighting the need for dollar-denominated assets – given the dollar’s role as a global trade currency – to facilitate capital raising for businesses and traders. He noted that the stock market offers a relatively cheaper alternative to traditional banking institutions for accessing such capital. “This will not only help those looking to raise funds but also investors seeking to deploy their dollars in the market rather than holding them idle,” he added. However, Rwabukumba clarified that hard currency financial instruments would be limited to international investors, the diaspora, and individuals earning in dollars or other hard currencies, depending on the denomination of the instrument. “It is not meant for those earning in Rwandan francs who would need to convert their income into dollars for such investments. That would put pressure on the local currency, and we don’t allow that,” he explained. Rwabukumba noted that individuals holding onto dollars instead of circulating them – particularly in the current economic climate – contribute to the depreciation of the Rwandan franc. He also pointed to forex traders engaging in speculation as another factor affecting currency stability. South Africa and Nigeria are prominent issuers of dollar-denominated bonds due to their larger economies and access to international markets. There are other several African economies doing the same such as Angola, Liberia, DR Congo, and Zimbabwe.
