IMF staff and the Rwandan authorities on Friday, March 22, 2024, announced that they had reached staff-level agreement on policies needed to complete the third reviews of Rwanda’s Policy Coordination Instrument (PCI) and program under the Resilience and Sustainability Facility (RSF), and the first review of the Stand-by Credit Facility (SCF) arrangement.

The declaration 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.

The conclusion of the mission paves the way for the consideration of the report by the IMF Executive Board in May this year.

Upon completion of the review by the Board, Rwanda would have access to SDR 57.5 million (equivalent to about US$ 76.6 million or Rwf99 billion) under the RSF and SDR 66.75 million (equivalent to about US$ 88.9 million or Rwf115 billion) under the SCF.

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

“The 2023 GDP growth continued to be robust at 8.2 percent 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 percent in February 2024, down from the peak of 21.7 percent in November 2022, owing to appropriately tight monetary policy stance and favorable developments in food prices as agricultural production rebounded at the end of last year,” Mr Atoyan stated.

“The current account deficit widened due to strong food and capital goods imports, along with lower-than-expected coffee exports. The Rwandan franc depreciated by 18 percent against the US dollar in 2023, a necessary step towards facilitating the much-needed external adjustment.
International reserves stood at 4.4 months of prospective imports at end-2023, providing a helpful buffer against external shocks.”

He, however, warned of potential risks and shocks which could adversely affect the country’s economic outlook.

“Deepening of geopolitical fragmentation, another spike in global energy and food prices, or slowdown in trading partners’ growth would weigh on the outlook. Longer-than-expected tight global financial conditions could adversely affect the availability of external financing. Also, already committed grants under the UK Migration and Economic Development Partnership continue to face legal uncertainties and could result in some budget pressures and lower FX inflows if they do not materialize,” he warned.

The IMF official called for deliberate measures to cushion the effects of the 2023 May floods, while also supporting the credible and balanced fiscal consolidation over the medium term.

He also recommended adoption of a comprehensive tax reforms that leverage synergies between tax policy and tax compliance to help create fiscal space for the country’s much-needed developmental spending.

“Expenditure rationalization will need to focus on enhancing the efficiency of public investment, better targeting of subsidies, and digital delivery of public services. The medium-term fiscal framework should be improved by further strengthening fiscal risk management and enhancing the transparency of fiscal accounts,” he added.

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.