Burundian banks set to extend to East Africa

There are signs that the Burundi economy, which had been brought to its knees during the civil war, is slowly getting back to its feet. The New Vision interviewed Gabriel Ntisezerana the then Governor of the Central Bank, about the future of the banking sector in Burundi and what the East African Community means to the sector and the economy of Burundi. Below are excerpts.

Question: For a number of years, Burundi has been striving to join the East African Community. In your view, what do you think your country will gain?
Answer: As the governor of the Central Bank, I think our neighbours will gain everything. And the Burundians will also gain everything. For example, our banks here will be able to open branches in Kigali, Kampala and Dar es Salaam. That will be a very big step forward in our local banking industry because the rate of interest is higher than in our neighboring countries. It means that banks from Ugandan, Kenya and Tanzania can come and open branches here in Bujumbura. That can only mean that the high rate of interest that Burundian banks charge here will be brought down.

What is the rate of interest here?
About 20 per cent. How about Uganda?

About 14 per cent
Don’t you see? I think in about five years we shall have the same interest rate in the whole East African region, which will be very good for the region. Another good advantage about opening up branches is that Burundian businessmen -and there are many who travel to Uganda to do business - will not have to travel with cash on them because it is risky. If we have a correspondent bank in Uganda, they will just have to travel with a cheque to Kampala and draw money on arrival.

Won’t Burundian businessmen find problems communicating with their counterparts in the other East African countries, especially Uganda which is one of your major trading partners?
That will not be a problem in the near future. Yes, we are French-speaking, but now our Government has introduced Swahili and English language studies right from primary school. Communication will be easier.

What are the responsibilities of Burundi Central Bank?
First of all our duty as the central bank is to stabilise the economy. The good thing is that now we have a stable political environment. If we see that inflation is going high, the central bank releases some cash in circulation. On the other hand, if we see that there is much money in circulation, it means that there is inflation, which also means that there are fewer products. So in that case, we withdraw the excess money to curb the inflation.

In Kampala all the forex bureaus are licensed by the central bank. Here, it seems it is a free-for-all business. Everybody is a moving forex bureau. Besides, they can’t tell whether a dollar is fake or not. They don’t issue customers with receipts, yet government is supposed to get some VAT from them.
It is bad I know. But we have introduced rules to streamline the business so that it is no longer conducted on the black market. Now they have an association and have been given rules by the Central Bank. Anybody who wants to set up a forex bureau has to be licensed by the central bank. There are those who still operate on the black market but we are encouraging them to join the association.

Now that Burundi has joined the East African Community, do you think there will be an integration of the banking sector? If one currency is introduced in the region as is envisioned, won’t it render your central bank useless?
That is a complicated question. We have already made some big steps by entering the East African Community. I have discussed several issues with my colleagues from Uganda, Kenya and Tanzania, but we haven’t discussed that issue yet.
The Burundi franc is stronger than the Uganda shilling. The exchange rate is almost 1 Burundi franc to 2 Ugandan shillings. The essential commodities here are very expensive compared to our country yet many of them are imported from Uganda. Worse still Burundi does not produce much either.
(Laughs) That is the same question I have when comparing the Burundi franc to the Rwandan franc. Two Burundi francs equal one Rwandan franc. Each currency is supported by production. That is the universal law of economics. But that happens when the situation doesn’t reflect the reality.
Before the civil war in 1993, one US dollar was the equivalent of 800 Burundi francs. Now the rate stands at 1,000 Burundi francs to a dollar. The production in our country is not good at present due to catastrophes like floods. But soon all that will change and the strong franc will represent the production in the country.
But the strong franc can be attributed to the financial aid we get from the IMF and the World Bank. But again, Uganda also gets the same aid from these two institutions. However, I think it will remain strong because in a few months, time production in Burundi will increase.

Gabriel Ntisezerana, fomer Central Bank Governor, now Second Vice President of Burundi