Over the past three years, Rwanda’s economy has faced many hurdles including challenges in the aftermath of the Covid-19 pandemic and inflationary pressures but it has also seen some major positive developments. The New Times’ Alice Kagina interviewed the Deputy Governor of the National Bank of Rwanda, Soraya Hakuziyaremye, on a range of issues and the country's financial status. The excerpts: Rwanda recently successfully paid its 2013 Eurobond and has another one issued in 2021. How did this come about, especially amidst the latest economic disruptions? We paid the full amount of the 10-year maturing bond this month and it drew a lot of headlines because of the global macroeconomic challenges we’ve seen in the last three years, starting with Covid-19, Russia-Ukraine war, and inflationary pressures which really hit public finances hard. In 2021, we issued a new Eurobond for liability management purposes and we were able to go back to the international markets because of Rwanda’s economic track record and issued that bond at a lower rate of 5.5 per cent, while that of 2013 was at 6.63 per cent. So, part of the money raised was used to repay $340 million of the 2013 Eurobond and left with $60 million which we repaid this month. This shows the prudent approach of the government and the treasury to manage our debt and the right timing to go to international markets to reduce the cost of our funding. We could also see that investors consider Rwanda as a safe placement. We raised $620 million for the second Eurobond but investors were offering up to two times that amount. The money was mainly borrowed to finance infrastructure developments and energy projects that sustain the economy in terms of our MICE strategy and unlock the potential of other sectors. The second financing will go into social economic development projects, be it in agriculture, promoting exports, but also mitigating the effect of climate change. Rwanda is on a digital transformation journey. However, this comes with threats in the financial sector, especially with payment systems. What are you doing to ensure the safety of these systems? We see more and more technology-driven innovations in the financial sector where the latest data shows that electronic payments represent 149 per cent of our GDP. So, to build secure and reliable payment systems, we have invested heavily as a Central Bank in our own cybersecurity capabilities. But we’ve also issued regulations to make sure that banks and payment service providers including mobile network operators have robust infrastructure to accommodate the increase in digital payments. This is coupled with educating the population so that they understand the benefits of adopting digital financial services, but also the risks of thefts attached to it. Raising the level of digital and financial literacy is something that is also a priority in the bank’s mandate. We are also working on the enforcement of our consumer protection law and regulations where we request payment service providers to give detailed explanations to their customers about the cost of digital financial services so that people do not fall prey to some of the abusive fees we have seen in the markets. Any updates on the findings of the study to have a Central Bank Digital Currency (CBDC)? We were hoping that by December 2022 we would have our position on CBDC following the feasibility study we were carrying out. But we wanted to make sure that we have a comprehensive study entailing the opportunities and threats as seen throughout the evolution of CBDC. This meant conducting broad consultations with the financial services industry and other government stakeholders like the Ministry of ICT and the Ministry of Finance to align on the assessments of findings we have. Globally, we have around 87 countries that have officially declared that they are either conducting the study or pilot CBDCs. Some countries launched their own digital currencies; like the Bahamas, and Nigeria with the e-Naira. China piloted its digital currency during the Olympics and Singapore has a purpose-bound one. Those are some cases we are looking at to decide whether Rwanda should adopt its digital currency or not, considering whether it would address our challenges in terms of payment systems, cost, and the impact on financial stability. We expect to have a position paper in the third quarter. However, preliminary findings show a trend in benefits of reducing the cost of cross-border transactions and the possibility of having a reliable affordable payment system. But we need to go into detail about the cost of developing the technology. We have more questions to look at including the threats of mediation. For instance, if the Central Bank issues it directly to a user, it would be killing the business of banks as intermediaries. So, we are carefully assessing this. What does the automation of Umurenge SACCOs mean in the general picture of digital transformation? The automation of Umurenge SACCOs is a project that started in 2015 and met a lot of challenges but we are now happy to see that up to 68 SACCOs have been automated. The system has been developed in-house by the Finance Ministry to make sure that all Umurenge SACCOs will be fully automated by the end of December, meaning they will no longer be doing manual reporting. This will allow us to have real-time data as a regulator and be more certain of the financials they are publishing. Microfinances are now able to participate in the Rwanda Integrated Payment System, meaning that one can transfer money digitally from a commercial bank to a SACCO. It’s an impetus even for SACCOs to attract more members that had shied away because the competition of Mobile Money was more convenient. The second step will be the consolidation of SACCOs at the district level which will provide them with more resources for shared services such as IT services, and hiring an audit firm that an individual SACCO could not afford. With the ongoing inflation and dollar strengthening, what do the Central Bank’s foreign exchange reserves look like? We have been able to maintain an adequate level of four months of imports and we don’t see it depleting by the end of this financial year, or by December. This is because of what we see as inflows of forex, especially from the tourism side, and also a very high increase in remittances. We registered around $420 million from the Rwandan diaspora, which is a target we thought we would achieve in 2025. We are also seeing an increase in exports. However, imports are increasing more rapidly which is a concern on our trade deficit. But overall, we don’t see any major challenge since we maintained the four months’ cover of imports; which we think is an adequate level to buffer any shocks. On the other hand, there is a depreciation of 4.6 per cent with the rate of the dollar today versus the Rwandan Franc, which is really high if you compare the depreciation rates we used to have. So, getting a dollar is much more expensive because of this disruption where we see a lot of demand due to rising imports. But we believe the increase in inflows can have a balance out, but that is conditional to export performance.
