IMF disburses $164.6 million to Rwanda

By Wycliffe Nyamasege
On 23 May 2024 at 07:28

The International Monetary Fund (IMF) has announced the disbursement of $164.6 million to Rwanda. The financing includes $76.2 million (SDR 57.5 million) from the Resilience and Sustainability Facility (RSF) and $88.4 million (SDR 66.75 million) from the Stand-by Credit Facility (SCF).

In a statement, the IMF said the disbursement of the funds follows the conclusion of the third review under the Policy Coordination Instrument (PCI), the arrangement under RSF, and the first review under the SCF arrangement with Rwanda. The Executive Board’s decisions were taken without a meeting.

“Despite challenging external conditions and ongoing fiscal consolidation, Rwanda’s economy maintains robust growth. Going forward, the policy mix should prioritize macroeconomic and financial stability, fiscal sustainability, and the restoration of buffers,” IMF said.

Notably, RSF provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness, while PCI is a non-financing instrument open to all IMF member countries.

On the other hand, SCF provides financial assistance to low-income countries (LICs) with short-term balance of payments needs.

The funds will, among others, help the government in its efforts to mitigate the impact of last year’s deadly flooding.

According to the IMF, sustaining the strong reform momentum under the RSF will enhance Rwanda’s economic resilience to future climate shocks.

"Going forward, the policy mix should prioritize macroeconomic and financial stability, fiscal sustainability, and the restoration of buffers. A carefully planned fiscal stance is needed to mitigate the impact of the 2023 floods while maintaining a credible and balanced fiscal consolidation over the medium term," IMF added.

"Monetary policy should target inflation within the desired range, while maintaining exchange rate flexibility to manage external shocks. Furthermore, vigilant oversight of financial stability risks, particularly concerning large exposures and rapid credit growth, is important."

The disbursement comes two months after IMF staff and Rwandan authorities reached a staff-level agreement on policies needed to complete the financing reviews.

The agreement followed the conclusion of a two-week mission led by Ruben Atoyan, who visited Kigali from 11–22 March 2024, to discuss the authorities’ policy priorities and progress on reforms regarding the reviews.

At the conclusion of the mission, Atoyan praised Rwanda’s economic gains and resilience, notwithstanding the challenging external environment.

“The 2023 GDP growth continued to be robust at 8.2 per cent year-on-year, on the back of strong performance in services and construction, as well as recovery in food crop production in the second half of the year. Inflation decelerated sharply in recent months. Headline inflation was 4.9 per cent in February 2024, down from the peak of 21.7 per cent in November 2022, owing to appropriately tight monetary policy stance and favourable developments in food prices as agricultural production rebounded at the end of last year,” Atoyan stated.