Press Release: Statement by the IMF Staff Mission to Rwanda

November 3, 2006

Press Release 06/238

The following statement was issued today in Kigali by Ms. Kristina Kostial, International Monetary Fund (IMF) mission chief to Rwanda:

"An IMF mission visited Rwanda during October 18-November 2, to conduct discussions for the 2006 Article IV consultation1 and the first review under the Poverty Reduction and Growth Facility (PRGF), which was approved by the Executive Board on June 5, 2006. The mission met with Minister of Finance and Economic Planning James Musoni, Governor Francois Kanimba of the National Bank of Rwanda, Minister of State in charge of Energy and Communication Albert Butare, and other senior government officials, as well as representatives of civil society, the business community, and Rwanda's international partners.

"Discussions revolved around Rwanda's medium-term challenges and program for 2007. While great strides have been made since the 1994 genocide, economic growth has started to slow down and poverty remains pervasive. Thus, the main tasks for Rwanda now are to sustain high growth and make headway toward the Millennium Development Goals (MDGs). To this end, the mission discussed how to foster private sector development and remove obstacles to growth, which include low agricultural yields, limited and expensive electricity supply, a poor transportation network, a shallow financing system, and high cost of doing business. Other topics included measures to marshal aid flows to their most productive use while preserving macroeconomic stability. The mission also reviewed performance of the social sectors and Rwanda's competitiveness in international markets. It stressed that the ongoing update of the PRSP is an important opportunity to develop a strategy to address Rwanda's medium-term challenges.

"The authorities' 2007 program is designed to advance Rwanda's medium-term agenda. It seeks to maintain macroeconomic stability while setting the stage for stronger medium-term growth. It will be important to gear policies to manage possible pressures for a real exchange rate appreciation from an increase in spending financed by external aid. Accordingly, the 2007 program allows a widening of the fiscal deficit in support of priority spending as long as it is grant financed and Rwanda manages its monetary and exchange rate policies to contain inflation pressures. Such priority spending will concentrate in the areas of education, health, the water and energy sectors to address Rwanda's need to develop human capital and improve its infrastructure gap. On the structural front, the focus will be on continuing reforms in public expenditure management, debt management and the civil service to improve the delivery of public services. Other reforms aim at raising agricultural yields and promoting private sector activity with a particular emphasis on the financial sector and legal framework.

"The mission has reached agreement, in principle, with the government on program objectives and policies for 2007. This agreement is subject to review and approval by the IMF's Management and Executive Board, which is expected to discuss the staff's report on this mission in early 2007. Upon conclusion of the first review, Rwanda would be eligible to draw the second disbursement under the PRGF arrangement of about US$1.7 million.

"We would like to thank the authorities for their cooperation and hospitality and for facilitating a fruitful dialogue with a range of public and private sector participants."

1 According to Article IV of the IMF's Articles of Agreement, all member states are entitled to receive regular (normally annual) visits to discuss economic trends and policies.


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