Rwanda

Years

Targets and attainment

Classification

1974-93

currency pegged to USD, no autonomous forex market; limited banking system, with central bank sometimes funding fiscal deficits, lending to public enterprises, and using global credit ceilings, moral suasion and rediscount facilities vis-à-vis commercial banks; 1977-78 credit controls restructured, become main instrument; important but seasonal flows of coffee production have major effect on bank lending; one-off rise in  interest rates late 1979; 1983 peg to SDR, with some depreciation vs USD, but most of overvaluation developed since 1980 not unwound; downward adjustment of interest rates 1987; late 1990 large devaluation, plus stabilisation policies and  various structural reforms; 1990-3 armed conflict worsens existing economic difficulties; mid-1992 further devaluation

augmented exchange rate fix AERF

1994

1994 genocide followed by civil war and new government, with return of previous exiles, and displacement of new refugees internally and to neighbouring countries; acute adverse economic effects include loss of skilled personnel from key state and financial institutions (with severe but largely temporary disruption to statistics)

unstructured discretion UD

1995-2023

1995 rehabilitation of central bank and restructuring of commercial banks (which have large amounts of non-performing loans); replacement of old high denomination banknotes by new; programme of stabilisation and wider structural reform including increased use of reserve requirements and rediscount facilities, some liberalisation and wider variation of interest rates, market-determined exchange rate, and increase in autonomy of central bank; efforts to resettle returning old and new exiles; by 1997 economic rebound, with GDP up and inflation down; forex rationing and reluctance to allow depreciation leads to re-emergence of varying parallel market premium, largely eliminated by weekly forex auctions 2001; reserve money programming complicated by unstable money multiplier, reserve money targets often exceeded; by 2007 exchange rate is managed and stable; commercial bank weaknesses gradually reduced; more issues of and OMOs in bills, bonds and repos, with policy rate 2008; monetary policy more proactive from 2010, but monetary transmission remains weak; exchange rate corridor as part of (sustained) move towards more flexible exchange rates; 2012 reserve money targeting made more flexible, standing facilities create corridor for repo policy rate; improvements in central bank expertise and communication; 2017 absorption of excess liquidity encourages use of interbank market; aim is transition to indirect and price-based monetary instruments with more focus on inflation; 2019 new operational framework for monetary policy, interest rate-based, with inflation target (5% ± 3% = very wide range, well overshot 2019-20, undershot 2021, overshot 2022-23) and plans for repo and bond market reform and more exchange rate flexibility; severe but short-lived effect of Covid-19, large policy response; monetary transmission identified by IMF 2023 as weak despite new framework, partly because of lack of exchange rate flexibility; statistical database now improved

loosely structured discretion LSD