IMF approves $268m credit to boost Rwanda’s economic resilience

On 15 December 2023 at 01:47

The International Monetary Fund (IMF) has greenlit a significant financial boost for Rwanda, approving a $268 million credit package. The approval comes on the heels of the completion of the Article IV consultation and successful reviews of Rwanda’s Policy Coordination Instrument (PCI) and Resilience and Sustainability Facility (RSF). Additionally, the IMF has sanctioned a new 14-month Stand-by Credit Facility (SCF) arrangement.

The funds include an immediate disbursement of SDR 36.97 million (approximately US$ 49.49 million) under the RSF and SDR 66.75 million (about US$ 89.35 million) under the SCF. The RSF arrangement, approved on December 12, 2022, amounts to SDR 240.3 million (around US$ 321.66 million or 150 percent of quota), with the first reviews completed on May 24, 2023.

Rwanda’s robust economic growth faces challenges from macroeconomic imbalances, compounded by factors such as repeated droughts, severe floods in May 2023, and global uncertainties like the war in Ukraine. The approved credit aims to provide policy space to address these challenges, with a focus on rebuilding external buffers, curbing inflation, and improving debt sustainability. Despite expected growth moderation, the IMF emphasizes the resilience demonstrated by Rwanda’s economic policies.

The Executive Board’s assessment, delivered by Mr. Bo Li, Deputy Managing Director, underscores Rwanda’s commitment to macroeconomic stability and strong performance under the PCI and RSF. While acknowledging the impact of recent floods, Li emphasizes the need for a balanced fiscal consolidation in the medium term. The IMF encourages comprehensive tax reforms and spending rationalization to achieve developmental goals, advance the climate agenda, and ensure sustainable debt management.

The approved SCF arrangement will play a crucial role in recalibrating the near-term policy mix. Monetary policy actions and exchange rate flexibility are highlighted as essential for containing inflationary pressures and preserving external stability. The IMF also applauds Rwanda’s commitment to building a resilient and greener economy, emphasizing the importance of maintaining momentum on RSF-supported climate-related reforms.

The approved funding reflects the IMF’s confidence in Rwanda’s economic policies and commitment to navigating challenges, fostering resilience, and advancing sustainable development.

Rwanda’s robust economic growth faces challenges from macroeconomic imbalances, compounded by factors such as severe floods.