AN OVERVIEW OF RWANDA’S MONETARY HISTORY
1. Currency and means of transactions before 1911
It is almost impossible to dissociate the study of Rwanda’s monetary history from that of the former Congo and Burundi, since the three countries had, until 1960, a common currency issued by a common monetary authority.
At the end of 19th century and early 20th century, transactions in Belgian Congo as well as in Rwanda-Burundi were rudimentary. The means of transaction used included salt, ivory, shells, copper, hoes and axes. During the earliest days of the exploitation of railway in the Belgian Congo, people used chickens to pay their ticket. As in many African countries, it was rather a barter economy.
Gradually, owing to the contacts with Arab and European traders, other exchange means such as cloth materials, guns, fake jewellery, etc… were used. At the same time, Portuguese and Austrian metallic currency were introduced in some regions.
When King Leopold II established Congo as a Sovereign Independent State, the HELIGOLAND Agreement of 1st July 1890 placed Rwanda within the German sphere of influence. It is in 1899 that the administrative region of Rwanda-Urundi was created. The official currency was then the rupee, subdivided into 100 hellers whose value was equal to 1.33 Deutsche Marks.
However, the first step towards the establishment of a monetary system in Central Africa was completed with the promulgation of the Royal Decree of 27th July 1887. It established the Franc as the money of account for the Independent State of Congo. The circulation of the same currency was authorised within the Rwandan territory.
On 8th February 1896, another royal decree established banknotes payable to the Congo Independent State’s Treasury, but as their circulation was very limited, these notes could not be successfully used by the local population. Finally, the decree of 27th August 1906 authorised the minting of an extra currency in cupronickel aimed at replacing the first copper coins and brass mitakos that were still being used. This new currency was also accepted in Rwanda.
2. The Bank of Congo and the issuing authority
On 11th January 1909, the Bank of Belgian Congo was established to promote that Colony’s economic development.
On 7th July 1911, a convention between the colony of Belgian Congo and the Bank of Belgian Congo empowered the latter with the issuing authority for a period of 25 years.
In virtue of the 4th November 1908 Convention between Belgium, France, Italy and Switzerland, the Belgian Congo became a member of the Latin Monetary Union. The currencies of that Union circulated largely in Congo. In October 1912, the Bank of Belgian Congo issued its first convertible banknotes of 20, 100 and 1000 Francs. The circulation of these banknotes was difficult despite its extension to Ruanda-Urundi territories.
After the starting of World War I, the free convertibility of banknotes was abolished by the dispositions of the decree-law of 19thOctober 1914 because of the Belgian Congo’s participation in the war. After World War I, Rwanda had already experienced a heterogeneous monetary circulation, comprising various currencies such as the Portuguese, the Austrian, the German, the Belgian and the Congolese currencies.
3. The official adhesion of Rwanda to the Congolese Franc Zone.
A new convention was signed on 10th October 1927 between the Colony of Belgian Congo and the Bank of Belgian Congo. It prolonged the issuing authority to 30th June 1952 and extended it to the territories of Ruanda-Urundi, which were then under the Belgium mandate after World War I. In virtue of this convention, the Bank could no longer be in the colonial Treasury’s debts exceeding some strictly fixed limits. It could still hold gold or foreign currency reserves of about 40 % the half of which in gold, of the amount of banknotes in circulation. The value in gold of the Franc was equal to that of the Belgian Franc (1 Fr = 0.418422gr of fine gold). This convention was ratified by the decree of 14th November 1927, putting thus an end to the state of forced currency by re-establishing at sight payment banknotes. As a result of the economic crisis of the 1930’s, the Belgian Franc was devaluated and, by the emergency decree of 1st April 1935, the Congolese Franc followed the pitch and, like the Belgian Franc, its gold parity was reduced to 0.0301264 grams of fine gold.
4. World War II
On 30th May 1940, a parliamentary decree imposed the forced currency of banknotes of the Belgian Congo Bank on the whole colony and in Ruanda-Urundi. On 7th June the same year, an agreement between Great Britain, France and Belgium fixed the Belgian Franc to 176,625 FR for 1£ and 100 BEF for 100FF. During the same month, the Bank of England undertook to provide the Bank of Belgian Congo with the currencies necessary for the importation of essential goods. The Congolese Franc was officially listed in London.
On 21st July 1941, an Anglo-Belgian agreement included Congo and Ruanda-Urundi within the Sterling zone, and stabilised the Congolese Franc at the rate of 176.625 FR against 1£. The Belgian Congo agreed to hand over to the Bank of England its surplus of gold production when the needs of the Colony and the Belgian Government would have been satisfied. The price of gold was then fixed at 168 shillings per ounce. The parliamentary ordinance of 10th March 1941 confirmed the new parity of the Congolese Franc. The exchange control was instituted on 10th March 1941 and this role was imparted to the Bank of Belgian Congo.
On 15th October 1944, a monetary agreement was concluded between Belgium and Great Britain, stating that the Belgian Congo and Ruanda-Urundi were no longer part of the Sterling zone and were included within the Belgian monetary zone. From that date, the National Bank of Belgium took over the implementation of Bretton Woods agreements and the regulation of exchange control on the whole area of the Belgian Franc zone.
5. Creation of the Belgian Congo and Ruanda-Urundi Central Bank
The approaching expiry of the 10th October 1927 convention with the Bank of Belgian Congo raised the issue of the latter’s extension. The Belgian Government believed that the situation had changed since 1927, given that the Bank of Belgian Congo was no longer the only bank established in Congo, since other bank institutions from Belgium and other countries were already present.
Therefore, the Bank of Belgian Congo could no longer play the role of the bank of banks (role of Central Bank) because it was competing with the institutions it was supposed to supervise. A monetary reform was therefore necessary and was effected through the decree of 30th July 1951 authorising the creation of a Congolese association of public law, in charge of carrying out tasks of public authority that the Bank of Belgian Congo was performing until then.
It was the Central Bank of Belgian Congo and Ruanda-Urundi that took over the monetary issuing on 1st July 1952, a day after the termination of the authority entrusted to the Bank of Belgian Congo.
The bank’s new mission was to guarantee the stability of the currency, to promote the economic development of the country and ensure credit control of banks and exchange.
6. Creation of the Issuing Bank of Rwanda and Burundi (B.E.R.B.)
Congo became independent on 30th June 1960 and acquired a political status different from that of Ruanda-Urundi. Consequently, a review of statutes of the institutions common to Congo and Ruanda-Urundi was necessary. The royal decree of 21st August 1960 established a public institution called "Banque d' Emission du Rwanda et du Burundi" (B.E.R.B.) whose head office was in Bujumbura with a branch in Kigali.
The Banque d'Emission du Rwanda et du Burundi‘s mission was to promote the economic development, the development of human and material resources as well as currency stability.
The Rwandan and Burundian Franc was also legally created and defined by the royal decree of 2nd September 1960 which conferred on it the content of gold of the former Congolese Franc, i.e. 0,01974824173 grams of fine gold.
For the new Issuing Bank to play its role, many measures were necessary to clarify practical modalities that were likely to facilitate this particular task. The Royal decree of 15th September 1960 put an end, from 22nd September of the same year, to the legal currency within the territories of Rwanda-Burundi of banknotes issued by the Central Bank of Belgian Congo and Ruanda-Urundi. The same decree specified that the exchange of banknotes of the Bank of Belgian Congo and Ruanda-Urundi had to be done on the basis of one Rwanda and Burundi franc against one Congolese franc.
The convention of 16th September 1960 between the political authorities and those of the Central Bank of Belgian Congo and Ruanda-Urundi, as well as the Issuing Bank of Rwanda and Burundi established the conditions in which the new institution would take over the commitments of the Central Bank of Belgian Congo and Ruanda-Urundi that resulted from the issuing authority.
Other legal texts, one dated 21st September 1960 and the other 6th March 1962, instructed the new institution to carry out through regulations, the control of exchanges, imports and exports.
7. Liquidation of B.E.R.B. and Creation of the National Bank of Rwanda
Rwanda and Burundi common monetary system did not last for long. Political, economic and psychological factors led to the dissolution of this Union.
Rwanda, which was kept apart from the Leopoldville centre of influence, noticed once again that the installation of various common institutions in Bujumbura would harm its economic development. The four years of economic and monetary union were just a failure, each party feeling cheated and blaming each deficiency on the other party. The divorce between Rwanda and Burundi became a reality when the economic union was liquidated from 1st January 1964.
A liquidation committee was put in place. Its outcomes were the convention of 18th May 1964 that put an end to the common monetary rule and to the issuing authority imparted to the B.E.R.B.
The National Bank of Rwanda, established by the Law of 24th April 1964, came into force from 19th May 1964 with the aim of fulfilling one of its main missions, namely the issuing of currency on the Rwandan territory. The B.E.R.B. rights and obligations were ex officio transmitted to the Royal Bank of Burundi (B.R.B.) and to the National Bank of Rwanda (B.N.R.).