Rwanda’s Central Bank Governor on growing domestic capital markets

Rwanda’s Central Bank Governor, John Rwangombwa, recently spoke to CNBC Africa about the significance of developing domestic capital markets in African countries. Domestic capital markets play a crucial role in providing stable and sustainable finance, supporting private sector growth, employment opportunities, and overall economic development. Despite their importance, many African countries still have underdeveloped capital markets, posing challenges in managing debt and currency mismatches. John Rwangombwa emphasized the need for countries to focus on building their own domestic debt markets to reduce reliance on external debts. He highlighted Rwanda’s journey in developing its capital markets since 2008 and the progress made in issuing government debts through the market. By introducing various debt instruments like quarterly and monthly bonds, the country has been able to attract more investors and enhance market liquidity. Moreover, the Central Bank has been working with institutions like the International Finance Corporation (IFC) and the World Bank to establish market makers and improve governance practices to encourage private investment in the capital market. Rwangombwa emphasized the importance of transparency, accountability, and adherence to international accounting standards to foster a thriving capital market ecosystem. He also addressed concerns about debt distress, stressing the need for countries to avoid falling into such situations. He cited examples of countries facing debt distress due to heavy reliance on commodity exports and volatile market conditions. Rwangombwa highlighted South Sudan as a case in point, noting how the country’s oil-dependent economy suffered due to conflicts and plummeting oil prices. However, he expressed optimism about the country’s efforts to stabilize its economy by increasing oil exports and implementing better financial management practices. Rwangombwa underscored the importance of diversifying economies away from reliance on commodity exports to mitigate the risk of debt distress. He warned that countries should not wait until they are in a crisis to act, urging proactive measures to strengthen domestic capital markets and ensure economic resilience in the face of global uncertainties.