IMF Staff Concludes Visit to Rwanda

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

  • IMF staff had productive discussions with the Rwandan authorities on policies to complete the sixth review under the Policy Coordination Instrument (PCI).
  • The Rwandan economy managed the COVID-19 pandemic well registering growth of 10.9 percent in 2021, but the outlook is clouded by the impact of the war in Ukraine and related uncertainties, which is likely to put the economy under strain.
  • Policy priorities are to contain inflationary pressures and support the most vulnerable in the face of rising energy and food prices while preserving fiscal discipline, safeguarding financial stability, and staying the course with the reform agenda for strong and inclusive growth. The National Bank of Rwanda (BNR) should stand ready to take appropriate actions calibrated to evolving domestic and external economic conditions.

Washington, DC: An International Monetary Fund (IMF) mission, led by Haimanot Teferra, held meetings with the Rwandan authorities during March 21 – April 5, 2022, to discuss the sixth review under the Policy Coordination Instrument (PCI). At the conclusion of the mission, Ms. Teferra issued the following statement:

“The IMF mission held productive discussions with the authorities and has made significant progress towards reaching a staff level agreement on policies needed to complete the sixth review under the PCI. Given the unusual economic uncertainty in the wake of the war in Ukraine, follow-up discussions will be needed over the coming weeks. The agreement is subject to approval by the IMF Management and Executive Board. Consideration by the Board is tentatively scheduled for the second half of June 2022.

“The Rwandan economy has navigated the COVID-19 pandemic well. Following a 3.4 percent contraction in 2020, real GDP rebounded strongly by 10.9 percent in 2021 on the back of a swift policy response to the pandemic, including an accelerated vaccination campaign. Driven by rising food and global energy prices, inflation picked up to 5.8 percent in February 2022, prompting the central bank to raise the policy rate by 50 basis points to 5 percent. Fiscal performance in the first half of FY 21/22 was in line with expectations, while financial sector stability has been maintained. The exchange rate has remained stable with reserves remaining comfortably above 4 months of prospective imports levels at end-2021.

“However, the rapidly changing global environment and spillovers related to the war in Ukraine are posing important challenges for countries around the world, including Rwanda. It is expected to weigh on Rwanda’s economic recovery on top of the lingering effects of the pandemic through deterioration in external conditions, including weaker-than-expected recovery in trading partners and further increases in international food and energy prices. Although the magnitude of the impact is difficult to foresee at this juncture, staff will revise growth projections down relative to the previous review, with risks tilted to the downside. Higher global energy and commodity prices will fuel inflationary pressure and widen the current account deficit further this year. Rwanda’s medium-term outlook, while uncertain, remains favorable, supported by the authorities’ commitment to sustainability of public finances and debt and continued structural reforms.

“Immediate policy priorities are to preserve fiscal and financial stability and mitigate the impact of the ongoing external shock on the most vulnerable. Should economic disruptions warrant further support to the affected groups or activities, such support should be temporary, targeted and transparent and accommodated by reprioritizing current and capital spending to avoid significant budget slippages and preserve debt sustainability. At the same time, it will be essential that reforms to enhance revenue mobilization and strengthen fiscal transparency and risk management continue to advance.

“The National Bank of Rwanda (NBR) should stand ready to take appropriate action to contain second-round effects of higher imported prices on inflation while also considering the evolving outlook for growth. Exchange rate flexibility should be allowed to mitigate the impact of rising oil and food prices on the current account and safeguard reserves. Interventions in the foreign exchange market should be limited to minimize excessive exchange rate volatility.

“The banking system remains well-capitalized and liquid, but continued vigilance is essential. Although non-performing loans remain low, credit risk continues to be elevated following the expiry of forbearance measures. In this context, the authorities should continue with intensive monitoring of credit risk and prudent loan classification and provisioning.

“The reform momentum to promote a more durable, inclusive and resilient growth should be maintained. In line with program commitments, further efforts are needed in enhancing the access to health care and education and better targeting social protection. Financial market deepening, digitalization, and further financial inclusion should help mobilize domestic savings. Progress with the authorities’ ambitious climate agenda is welcome and attracting concessional financing and private sector support remains key to its implementation.

“The mission is grateful for the authorities’ excellent cooperation and candid and constructive discussions and reaffirms the IMF’s support for the government’s efforts to implement its economic reform program.”

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