Central banks in Africa can play a bigger role in financing development by allowing investments and increasing savings in their respective countries, a top monetary official said.
“We believe we can contribute to the development of our respective countries, through innovative ideas. We believe we can contribute to the development of financial markets without jeopardising price stability which is our core objective,” said Ambassador Claver Gatete, the Governor of the National Bank of Rwanda (BNR).
Gatete was speaking yesterday during a three day summit of African Central Bankers in Kigali to discuss their role in financing development. He said that developing financial markets was a key component of increasing financing for development. The summit ends on June 1, 2011.
“As the country (Rwanda) is undertaking new developments, like SACCOs we are looking to capital markets as one area to boost Foreign Direct Investments,” Gatete said.
Amb Gatete noted that to have GDP growth of seven percent and above, African countries need 30 percent FDI and savings above 20 percent.
Prof.Paul Collier, an expert to share International experience on central bank financing for development suggests that Rwanda and the entire African continent should gradually increase international capital flows.
“Two big messages for African central banks and Rwanda in particular, increase international borrowing and investing in natural assets,” said Collier, who is the Director for the Study of African Economies.
He urged that African central banks need to develop strong domestic savings culture and go for mortgages, and use the money to buy houses for ordinary people.
Mortgages would bring about double benefit, provide descent homes for ordinary people in rural areas and open up thousands of jobs, he said.
Prof. Mohamed Ben Ndiaye, the Director General of West African Monetary Agency said development is reflected in the UN Millennium Declaration, which asserts that every individual has the right to dignity, freedom, and basic standards of living that includes freedom from hunger and violence.
Challenges highlighted by Ndiaye, include, low total FDI inflows to Africa, which range 3.1 percent as a share of the continent’s GDP in 2003 to 5.7 percent in 2008.
Another challenge observed was inability of African countries to offset the large negative current account balances with significant growth in capital flows.
The continental seminar represented by 50 institutions will discuss, challenges of financing development in Africa, African financial systems and financing development, sharing experience in North Africa, West Africa, Central Africa and East Africa.