Prime Minister Edouard Ngirente has said that as the global economy continues to evolve at a higher pace, policymakers and central banks are key players in addressing new challenges to ensure that Africa continues its transformation trajectory consistent with the Agenda 2063.
He was officiating at the 42th Annual Meeting of the Association of African Central Banks (AACB) that convenes more than 400 participants both local and international at the Kigali Convention Centre.
Discussions will include appropriate strategies for sovereign debt management, drawing on lessons learned in Africa and other regions of the world.
Prime Minister Ngirente said that borrowing and debts are healthy for the growth of economies, when it is done responsibly by maximising returns on investments.
“Debts can foster economic growth, and borrowing responsibly, maximizing our returns on the investments, and managing our debts is key to keeping the debt levels sustainable,” he said.
He noted that in Rwanda, the debt sustainability analysis shows that the risk of Rwanda’s debt remains low even though the net present value of debt to GDP has been increasing over time, reaching 29% in 2018 against a threshold of 50%.
He added that the share of concessional loans in the total debt stock stood at 63% as of the end of 2018, and in the last decade the Rwandan economy has grown by 7.8% driven by robust activities in all sectors of the economy.
“It is therefore important to keep in mind that the act of borrowing itself is not inherently a bad act,” he noted.
Meanwhile, Ngirente said that despite numerus challenges like recurrent commodity price shocks, other external shocks and external imbalances, in some cases, African Central Banks have contributed to ensuring macroeconomic stability.
“Currently, with modern financial ecosystem, we are dependent on Central Banks to safeguard our individual country’s monetary policy and financial systems. They also help to set standards and protocols that make it easier to have intercontinental transactions of goods and services,” he said.
They include modernisation of payment systems and reduction of transaction costs in exchange of goods and services, cross border banking, easy exchange of currencies and economic integration on the African continent.
Meanwhile, the central banks are meeting at a time when the global economy is facing bigger vulnerabilities that threaten to worsen these debt numbers across the world.
In the end of 2018, the average public debt for the African continent was at 45 percent of GDP, with 19 countries above 60%, the then threshold set by the African Monetary Co-operation Programme.
Abebe Aemro Selassie, Director of the African Department at the International Monetary Fund (IMF) while delivering his keynote address said that, “We need to think about how Central banks can tackle high debt to GDP ratios in Africa.”
According to Abebe Aemro Selassie, the most acute challenge with respect to debt distress is being faced by countries which were hit by the shock decline in oil prices and other commodity prices around 2014 and 2016.