The political economy of central bank effectiveness: the case of national bank of Rwanda

Research output: Working paper

Abstract

In a survey conducted in Rwanda by the Pockets of Effectiveness project, the Central Bank was listed as among the top-performing government organisations in the country. This paper examines the political determinants of the portrayal of the National Bank of Rwanda’s (BNR) achievement of its mandate: promoting price and financial stability. The paper uses the political settlements framework to highlight the political determinants of financial sector reforms in the country. Rwanda’s underlying political economy – and particularly the government’s evolving relationships with domestic capital vis-à-vis foreign capital – has contributing to shaping the Rwandan financial sector’s trajectory. In particular, the Rwandan government has prioritised a strategy of being a financial sector hub, which is based on increased global financial integration and portraying the achievement of ‘best practice’ reforms. These goals have come at the cost of traditional developmentalists goals for central banks, including direct lending for structural transformation. BNR has achieved success in its mandate. However, achieving success in its market-led mandate reduces the policy tools at its disposal to promote structural transformation. The paper argues that reforming BNR along neoliberal lines has mirrored the broader macro-strategy of the country, with the ruling Rwandan Patriotic Front (RPF) choosing to rely increasingly on legitimacy with external actors, rather than supporting the growth of strengthening domestic state–business relationships to support economic transformation.
Original languageEnglish
Place of PublicationManchester
PublisherUniversity of Manchester
Pages1-35
Number of pages35
ISBN (Electronic) 9781912593637
Publication statusPublished - 2020

Publication series

NameEffective States and Inclusive Development Research Centre Working Paper
No.151

Keywords

  • Rwanda
  • pocket of effectiveness
  • Africa
  • banks
  • finance
  • political settlement

Research Beacons, Institutes and Platforms

  • Global Development Institute

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