Rwanda's Central Bank eyes digital currency as bank turns 60

The National Bank of Rwanda is commemorating sixty years since its establishment in 1964, a remarkable milestone for a country that has overcome a turbulent past to emerge as a symbol of peace and prosperity. The bank has been a key player in steering Rwanda towards macroeconomic stability and fostering economic development. In an exclusive interview with CNBC Africa, the Governor of the National Bank of Rwanda, John Rwangombwa, shed light on the future prospects for the bank and the critical areas it is exploring. Over the years, the financial sector in Rwanda has experienced significant growth, with assets expanding twenty-two times since 2006. The number of financial institutions has also increased following market liberalization. The bank's monetary policy framework has evolved into a forward-looking, market-oriented, interest-based model, showcasing the institution's maturity and progress. Governor Rwangombwa attributed this success to the collaborative efforts of various partners, including the government and other supporting entities that have contributed to capacity building and regulatory framework enhancement. Reflecting on the past achievements, Governor Rwangombwa highlighted the importance of adaptability in navigating through the evolving landscape shaped by digital transformation, technological advancements, climate change, and geopolitical challenges. He emphasized the need for agility and leveraging technology to sustain economic stability and growth amidst uncertainties. Rwanda stands as a shining example of a country that has achieved macroeconomic stability, evidenced by the significant drop in inflation rates from 21.7% to approximately 4.5% over the past three years. The Governor pointed out that Rwanda's success is not solely attributed to the central bank but is a collective effort involving the government and various institutions working towards a common goal of prosperity for all. Central to Rwanda's future plans is the exploration of digital currency, with discussions underway to introduce a central bank digital currency within the next two years. Governor Rwangombwa acknowledged the challenges posed by private cryptocurrencies and emphasized the importance of establishing a regulated digital currency issued as legal tender by central banks. This move aims to address the existing gaps and provide a secure and reliable alternative to private digital currencies. In response to concerns about non-performing loans in the banking sector, Governor Rwangombwa reassured that Rwanda has maintained a low industry average of below 5% for non-performing loans, with a recent slight increase to 5% in March. He expressed confidence in the quality of loans in Rwandan banks and affirmed that there are no significant concerns regarding non-performing loans. The Governor's remarks underscore Rwanda's commitment to financial stability, innovation, and resilience in the face of emerging economic challenges, setting a solid foundation for the bank's future endeavors.