Sunday 12, November 2017 by Matthew Amlôt

IMF staff completes review visit to Rwanda

An International Monetary Fund (IMF) team, led by Laure Redifer, visited Rwanda from October 25-November 8, 2017, to discuss economic policies that could support the completion of the eighth and third reviews of Rwanda’s PSI and SCF-supported programmes.

At the end of the visit, Ms. Redifer issued the following statement:

“The IMF team reached preliminary agreement with the government, subject to approval by IMF management and its Executive Board, on policies that could support completion of the eighth and third reviews of Rwanda’s PSI- and SCF-supported programmes, respectively. The Executive Board is expected to consider the reviews in January 2018.

“The team highlighted that Rwanda’s economy continues to perform well, with strong implementation of its IMF-supported programmes. Due to a combination of factors (drought, completion of large construction projections, and policy adjustment to address external imbalances), growth decelerated over the second half of 2016 and in early 2017. The team projects a gradual growth recovery during the second half of 2017, owing to good rains and expanding domestic production. Overall, growth in 2017 is expected to be 5.2 per cent, which is still well above growth averages for sub-Saharan Africa. A growth acceleration in the medium term will lead to average growth above seven per cent over the next three years. After peaking in early 2017, headline inflation declined to well below the central bank’s five per cent headline target as food supply constraints and depreciation pressures receded. By end year, inflation is expected to remain below five per cent.  

“Rwanda’s external trade deficit contracted over the past 18 months, following a strong  improvement in exports of goods and a modest reduction in imports. These developments were partly in response to decisive government policies; in particular, greater exchange rate flexibility, public spending restraint and prudent monetary policy. In addition, the government implemented a “Made in Rwanda” policy to encourage domestic production of certain goods (cement, rice). These efforts have led to an accumulation of foreign exchange reserves through end August.

“Recent gains in revenue mobilisation have tapered off owing to the growth slowdown, tax incentives, and the implementation of the EAC restrictions on used clothing. To reestablish a rising trend in the tax revenue ratio to GDP, the mission encouraged passage of income and property tax laws as soon as possible, and analysis of the effectiveness of various tax incentives.

“The IMF-supported programmes are on track, with end-June targets met and most structural benchmarks on track. The programmes are scheduled to expire in December 2017, and the authorities are expected to request a one-year extension of the PSI-supported programme.

“The team met with Minister of Finance and Economic Planning, Claver Gatete; Governor of the National Bank of Rwanda, John Rwangombwa; Minister of Agriculture and Animal Resources, Gerardine Mukeshimana; and other senior government officials, private sector representatives, civil society organisations, academia, and development partners. The team thanks the various interlocutors for the collaborative and fruitful discussions.”