In accordance with the current monetary policy framework, various instruments are at NBR disposal to achieve the targets set in the monetary program. These instruments include open market operations, rediscount policy, changes in reserve requirements and foreign exchange intervention.
Open market operations
This consists of the NBR intervention on the money market to mop up or to inject liquidity in the banking system and keep the interbank rate within the money market rates corridor of ± 1 percent around the central bank rate.
These open market operations include notably repos or reverse repos operations, treasury bills issuance, standing deposits facility and standing lending facility and refinancing window.
Depository institutions (commercial banks) are obliged to hold minimum reserves against their liabilities, predominantly in the form of balances at the central bank. The reserve requirements ratio was lowered to 4% since April 2020. Changes in reserve requirements affect the liquidity of the banking system and its capacity to create loans.
Foreign exchange intervention
The National Bank of Rwanda intervenes in the foreign exchange market, among other reasons, in order to defend the exchange rate and to achieve a desired amount of international reserves. The intervention in the foreign exchange market directly affects reserve money and hence has a direct impact on overall liquidity in the economy and the stance of monetary policy.
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