News Brief: IMF Completes First Review of Rwanda under PRGF-Supported Program and Approves US$12.5 Million Disbursement

July 31, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Rwanda's second annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1 (See Press Release No. 99/53). The completion of this review enables the release of SDR 9.52 million (about US$12.5 million), which brings total disbursements under the three-year program to SDR 42.8 million (about US$56.3 million).

After the Executive Board's discussion on Rwanda, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, made the following statement:

"Directors commended the Rwandese authorities for their success in maintaining macroeconomic stability with solid growth and low inflation. They welcomed the strong measures the authorities have taken to address the difficulties in the fiscal area faced in 1999, and to accelerate structural reforms where progress has been slower than envisaged. This has provided the basis for the completion of the review and a consolidation of Rwanda's good track record of policy performance.

"The authorities were encouraged to vigorously implement the recently initiated measures to improve revenue collection, including the strengthening of tax and customs administration and the envisaged introduction of the VAT in early 2001. Improved domestic resource mobilization is essential for ensuring the sustainability of Rwanda's social and other anti-poverty spending programs in the medium term while allowing a decline in its heavy dependence on external aid over time.

"Directors noted with satisfaction that the authorities, when faced with revenue shortfalls, had protected the envisaged increase in recurrent social spending and had been able to reduce expenditure in nonpriority areas. The authorities were encouraged to further enhance the level and efficiency of social and other anti-poverty spending and to identify such priority spending items in the budget (starting with the mid-2000 revised budget). In this regard, Directors stressed the importance of putting in place a medium-term expenditure framework-linking budget lines more directly to envisaged outcomes-as well as adequate expenditure tracking systems and beneficiary surveys to monitor the impact of spending. They also expected that military spending would increasingly be shifted to the social areas as efforts to promote peace in the region advanced.

"Directors encouraged the authorities to continue their efforts to enhance the transparency of the budget preparation and execution process, systematically produce public accounts, and submit government financial operations to audits by the Auditor General. Directors also noted the commitment to enhance the efficiency of the civil service, including through the replacement of unqualified by qualified staff and the restructuring of ministries, and called for a prompt implementation of the recently adopted measures.

"Directors looked forward to Rwanda's Interim Poverty Reduction Strategy, which the authorities expect to prepare before the end of the year, and which will form the basis for continued Fund support under the PRGF, as well as for other financial support, including under the enhanced HIPC Initiative," Mr. Sugisaki said.

1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It was 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 development partners, and articulated in a poverty reduction strategy paper. 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. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 1/2-year grace period for principal payments.


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