Rwanda’s reliance on the US dollar for imports and exports should not be abandoned prematurely, according to Soraya Hakuziyaremye, Deputy Governor of the National Bank of Rwanda.
This perspective emerges as major economies, including Brazil, Russia, India, China, and South Africa (BRICS), collectively known as BRICS, strive to reduce their dependence on the US dollar through a process called de-dollarisation.
As the dominant global reserve currency, the US dollar remains crucial in international trade, investment, and financial transactions.
Hakuziyaremye made these remarks on Thursday, May 11, during the release of the quarterly Monetary Policy Committee and Financial Stability Statement, which reviewed recent global and national economic developments, along with potential interventions.
“To diversify the foreign currencies a country employs, one must consider its trading partners. In Rwanda’s case, we trade with China, European countries, the DR Congo, and the UAE, using dollars,” she explained.
Regarding Rwanda specifically, she stated, “It would be premature to announce that we will adopt alternative currencies.”
However, concerning the African Continental Free Trade Area (AfCFTA), she highlighted plans to establish a Pan African Payment Settlement System that will enable African nations to trade using their own currencies.
“Perhaps that would allow countries to reduce their reliance on the dollar when trading among themselves, but there is still a long way to go,” she added.
High Foreign Exchange Costs
With the resurgence of economic activities, traders have reported a shortage of dollars in the market. The increase in import bills compared to export revenue has widened the trade deficit by 35 percent.
Governor John Rwangombwa explained that the rise in Rwanda’s exports puts pressure on the balance of payments, consequently affecting the exchange market.
However, he clarified that traders can still obtain dollars, albeit at a higher cost and sometimes with delays.
“The shortage of dollars has not resulted in reduced imports. All importers can acquire the foreign exchange they need, but the noticeable issue is the high cost,” he said.
The Central Bank reported a 3.07 percent depreciation of the Rwandan Franc against the dollar. On the other hand, the continuous growth in tourism revenues and remittances has alleviated pressures on the exchange market, as noted by Rwangombwa. He assured that the country maintains a secure federal reserve with 4.6 months of import cover.