Rwanda adds gold to foreign reserves mix

Regional central bankers across East Africa have taken a unified stance in diversifying their reserve assets by investing in gold. This shift comes in response to the changing global economic landscape. CNBC Africa recently interviewed Ted Kaberuka, an Economic Analyst and CEO of M4Progress Ltd, to delve into the latest developments regarding this monetary policy adjustment. The conversation touched on various key aspects including interest rates, trade deficits, and the strategic decision of the National Bank of Rwanda to invest in gold. During the interview, Kaberuka expressed surprise at the decision of the central bank to maintain the interest rate at 6%, despite the need for increased lending. He highlighted the importance of maintaining a balance between promoting lending and controlling inflation. By keeping the interest rate steady, the central bank aims to manage inflation while also encouraging private sector borrowing. This decision reflects a cautious approach to monetary policy in the face of evolving economic conditions. Another key point raised in the discussion was the widening trade deficit and its implications for the Rwandan economy. Kaberuka emphasized the interconnectedness of the global economy with domestic and regional markets. Instabilities at the international level can have a significant impact on smaller economies like Rwanda, highlighting the need for strategic financial planning and diversified reserve assets. The most significant development discussed during the interview was the decision of the National Bank of Rwanda to invest in gold. Kaberuka explained that gold remains a popular choice for central banks and national reserves due to its stability as an asset. Unlike foreign currencies that can be influenced by political decisions, gold provides a secure store of value. By adding gold to its reserve portfolio, Rwanda aims to safeguard its assets against external economic shocks and fluctuations in currency values. Looking ahead, Kaberuka projected a relatively stable economic outlook for Rwanda. With the central bank maintaining the interest rate, the level of private sector borrowing is expected to remain consistent. Kaberuka suggested that commercial banks could enhance their lending activities by diversifying their offerings and reaching a wider customer base. Additionally, the issuance of bonds on the domestic market by the central bank may provide further opportunities for lending to the government. In conclusion, Rwanda's strategic move to diversify its reserve assets with gold investments reflects a proactive approach to financial management in a volatile global economy. By balancing traditional assets with alternative options like gold, the National Bank of Rwanda positions itself to weather economic uncertainties and safeguard the country's financial stability.