Rwandan Franc: Political Stability Amid Economic Struggles
The Rwandan franc (RWF) has experienced a severe depreciation, hitting a record low against the US dollar as the country heads towards its general election. This decline has been dramatic, with the exchange rate climbing from 882 RWF per USD in 2019 to 1,300 RWF in 2024. Despite Rwanda’s significant progress in infrastructure and economic growth, the currency continues to struggle.
One might expect political uncertainty to cause volatility in the currency market. However, Rwanda’s political landscape is relatively stable under President Paul Kagame, who is expected to secure a fourth term with little opposition. His leadership has been marked by substantial development and peace, transforming Rwanda since the 1994 genocide. The country’s focus on becoming a middle-income economy by investing in technology and infrastructure has spurred economic growth, yet challenges remain. Being landlocked and having limited exports such as coffee, tea, and niobium puts Rwanda at a disadvantage compared to its neighbors.
Ethiopian Birr: Consequences of Conflict and Debt
The Ethiopian birr (ETB) has been in freefall, dropping to a record low of 58 ETB per USD, from less than 25 ETB just a few years ago. Ethiopia’s decline is largely attributed to political instability and the aftermath of a devastating conflict that disrupted its once-promising economic trajectory. The country had been experiencing double-digit growth rates and was a hub for industries such as aviation and apparel manufacturing, attracting significant foreign investment, especially from China.
However, the recent war has severely impacted economic stability. Coupled with the heavy debt burden from extensive borrowing for infrastructure projects, Ethiopia is now grappling with economic recovery. The government has had to negotiate with creditors for debt restructuring, which has further strained the economy.
Ghanaian Cedi: Debt Default and Economic Challenges
The Ghanaian cedi (GHS) has also faced a dramatic decline, trading at an all-time low of 15.50 GHS per USD. This is a significant drop from its rate of 1.5 GHS per USD in 2011. Ghana’s economic troubles stem from a combination of heavy debt, slow growth, and a recent default on its debt. The government recently reached an agreement with private creditors to restructure $13 billion of its debt, involving substantial losses for bondholders.
This financial restructuring has deterred further investment, leading to high yields on government securities and downgrades from rating agencies. The economic crisis has left Ghana struggling to attract the necessary capital to stabilize its economy.
These currency collapses are part of a broader trend affecting several African nations. The Tanzanian shilling, Zambian kwacha, and Nigerian naira have all seen significant depreciations in recent years. However, not all African currencies are performing poorly. The South African rand (ZAR) has rebounded by nearly 10% this year, bolstered by a coalition agreement between the ANC and opposition parties. Similarly, the Kenyan shilling, Ugandan shilling, and Botswana pula have shown positive trends, with the Ugandan shilling rising by over 6% and the Botswana pula by 3%.
The collapse of the Rwandan franc, Ethiopian birr, and Ghanaian cedi highlights the complex interplay between political stability, economic policy, and external factors such as debt and conflict. While some African currencies are struggling, others are managing to find stability and growth. Understanding these dynamics is crucial for investors, policymakers, and citizens alike as they navigate the challenges and opportunities in Africa’s diverse economic landscape.
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