Press Release: IMF Approves In Principle Third Annual Arrangement of Rwanda Under PRGF-Supported Program and Approves US$12 Million Disbursement

December 22, 2000

The Executive Board of the International Monetary Fund (IMF) completed the review of Rwanda's program under the Poverty Reduction and Growth Facility (PRGF)1 and approved in principle the third annual arrangement in an amount equivalent to SDR 28.56 million (about US$ 37 million) to support the government's economic program. The approval of this arrangement enables the immediate release of SDR 9.52 million (about US$12 million).

Rwanda's three-year program, originally supported under the Enhanced Structural Adjustment Facility (ESAF), was approved on June 24, 1998 (see Press Release No 98/24), in an amount equivalent to SDR 71.4 million (about US$93 million) of which SDR 42.84 million (about US$56 million) has been disbursed.

A final decision by the IMF Executive Board was pending discussion of Rwanda's Interim Poverty Reduction Strategy Paper (I-PRSP) by the World Bank Executive Board, which took place on December 22, 2000.

After the Executive Board's discussion on Rwanda, Eduardo Aninat, Deputy Managing Director made the following statement:

"The authorities are to be commended for preparing an interim PRSP, which is a first important step in formulating a comprehensive poverty reduction strategy, on the basis of preliminary consultations with civil society. The interim PRSP provides a sound basis for the development of a full PRSP, for Fund concessional assistance, and for reaching the decision point under the enhanced HIPC Initiative. The preparation of the full PRSP will enable the authorities to conduct national consultations and strengthen the analysis of determinants of poverty and constraints on poverty reduction.

"The program for 2000/01 that is supported under the third annual PRGF arrangement tackles a number of the factors that should contribute to the achievement of policy targets. It is also part of a longer-term strategy to increase spending for poverty reduction and investment in both physical and human capital, while reducing the fiscal and external imbalances over time, preserving the debt sustainability that would be provided via application of the HIPC Initiative, and promoting private sector savings and investment, and more rapid economic growth.

"It will be important that the authorities implement and strictly enforce the envisaged fiscal measures, as this would facilitate achievement of the revenue and overall fiscal targets for 2001. It will also be important to increase anti-poverty expenditure as planned, in part through reducing defense outlays. The program includes an acceleration of privatization and of reforms in the civil service, the financial sector, and governance, as these steps are instrumental for achieving Rwanda's development and anti-poverty objectives.

"The authorities need to implement a plan for eliminating domestic arrears and audit disputed claims before settling them. To avoid the reemergence of arrears, improvement of expenditure monitoring and control is essential.

"To strengthen the effectiveness of monetary policy, the central bank should expand its policy instruments and use them more actively. The quick adoption of a system of auctions of foreign exchange will be an important policy step.

"A final decision on Rwanda's debt relief under the enhanced HIPC Initiative is pending action by the World Bank's Board later this week. A press release will be issued jointly with the World Bank following those deliberations," Mr. Aninat said.


Program Summary

In the context of a generally successful reconstruction and economic reform effort since the 1994 genocide, Rwanda continued to make progress in macroeconomic stabilization and structural reforms in the 1999/2000 program, although not without some slippages and delays.

The government is committed to implement a medium and long-term strategy to remove constraints on sustainable economic growth and achieve poverty reduction.

The medium-term macroeconomic strategy of the program aims at taking the necessary steps to graduate from excessive reliance on donor funds, arresting the deterioration in debt sustainability indicators, and thus decrease uncertainty about the sustainability of macroeconomic stability. In line with the medium-term objectives, the program for 2001 aims at consolidating macroeconomic stability while initiating progress toward a sustainable reduction in the underlying macroeconomic imbalances, and taking clear steps toward poverty reduction. In this context, the authorities will reduce the overall fiscal deficit from 9.6 percent of GDP in 2001 to about 7.8 percent by 2004, mainly on the basis of steps to increase the now very weak revenue performance.

To this end the fiscal deficit for 2000 will be close to the program target. In 2001, the authorities will limit the overall fiscal deficit to 9.6 percent of GDP and achieve a primary fiscal surplus of 0.2 percent of GDP. Attainment of the 2001 fiscal targets would involve important revenue measures that are projected to improve revenues by about 0.7 percentage point of GDP to 10.9 percent of GDP.

The monetary program for 2001 is consistent with a 6 percent real GDP growth, 3 percent inflation, and a significant acceleration of bank credit to the private sector. To ensure meeting its monetary targets, the National Bank of Rwanda (NBR) will make more active use of its sterilization instruments. It will also introduce foreign exchange auctions so as to ensure market determination of the exchange rate.

Structural reform program will focus on strengthening the bank supervision system and addressing weaknesses of micro finance. The privatization of the energy and telecommunications sectors will be another key measure of the structural reform program. The authorities also intend to continue the implementation of the civil service reform strategy, and a civil servants' code will be adopted. In the budgetary area, high priorities are to strengthen the Rwanda Revenue Authority's performance.

In the area of governance, the government has committed itself to strengthening the office of the Auditor General and carrying out the planned audits.

Poverty Reduction Strategy

To decisively address poverty, the government envisages significant increases, informed by the PRSP process, in antipoverty spending over the next years from about 4.1 percent of GDP in 2000 to 6.9 percent by 2004 and to about 9 percent over the long run. Such spending would support policies and measures in the areas of education, health, water and sanitation, rural infrastructures, human settlements, gender equality, youth job creation, and agricultural sector reform.

Rwanda joined the IMF on September 30, 1963, and its quota2 is SDR 80.10 million (about US$105 million). Its outstanding use of IMF financing currently totals SDR 56.36 million (about US$74 million).

Rwanda: Selected Economic and Financial Indicators







2000 Proj.

Domestic economy

(Annual percent change)


Real GDP







Consumer prices (end of period)








External economy

(In millions of U.S. dollars)


Exports, f.o.b.







Imports, f.o.b.







Current account balance
(excluding official transfers)







Private capital (net)







Public capital (net)







Capital account balance








Gross official reserves (end of period)







Current account balance (in percent of GDP)







Change in real effective exchange rate (in percent, + = appreciation) 1/








Financial variables

(In percent of GDP, unless otherwise indicated)


Overall fiscal balance (excluding grants)







Change in broad money (in percent)







Interest rate (in percent 2/ 3/








Source: Rwandese authorities; and IMF staff estimates and projections


1/ Figure for 2000 is for September.
2/ One-year savings deposits.
3/ Figure for 2000 is for September.

1On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and donors, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. For Rwanda, an interim PRSP dated November 2000 was considered by the Executive Boards of the IMF and World Bank as an adequate basis for concessional assistance. The authorities aim at producing their full-fledged PRSP by end-2001 through a participatory process involving civil society, to supplement and update the interim PRSP. It is understood that all policy undertakings in the interim PRSP beyond 2001 are subject to reexamination and modification in line with the PRSP. Once completed and broadly endorsed by the Executive Boards of the IMF and World Bank, the PRSP will provide the policy framework for subsequent reviews under this PRGF arrangement. PRGF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years with a 5½-year grace period on principal payments.

2A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share of the allocation of SDRs.


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