Statement by an IMF Mission to Rwanda

Press Release No. 08/273
November 5, 2008

An International Monetary Fund (IMF) mission led by Ms. Zuzana Murgasova visited Rwanda October 22-November 4, 2008 to conduct the 2008 Article IV Consultation and the Fifth Review of Rwanda's performance under the Poverty Reduction and Growth Facility (PRGF). The mission met with the Minister of Finance and Economic Planning, Honorable James Musoni, the Governor of the National Bank of Rwanda, François Kanimba, other government and central bank officials, representatives of the business community, and development partners.

The mission issued the following statement in Kigali today:

"Rwanda's economy continued to perform well in the first six months of 2008. Due to strong activity in the agriculture sector, construction, and services, economic growth is expected to reach 8 ½ percent in 2008. Strong revenue collection and disciplined spending framed the authorities' prudent fiscal policy stance in the first half of the year. Boosted by rising commodity prices, imports grew faster than exports, leading to a widening current account deficit. Overall, policy performance under the PRGF-supported program was satisfactory and all end-June 2008 quantitative targets were met.

"However, inflation has risen sharply since the first quarter of 2008, reaching 21 percent in September, as a result of the surge in international food and fuel prices and domestic demand pressures. In combination with the slowdown of the world economy and recent movements in exchange rates, there is a risk that the current account deficit could widen further and thus pose additional challenges for macroeconomic management in Rwanda.

"As a result of these risks, the IMF mission projects real economic growth to slow to 6 percent in 2009. Growth in agricultural production will be buttressed by ongoing policies to promote agricultural productivity. The recent decline in world commodity prices should help reduce inflation to single digits in the second half of 2009.

"Fiscal policy in the remainder of 2008 and in the first half of 2009 is appropriately geared towards limiting the potential risks to the economic outlook. The minibudget for January-June 2009 allows for the full use of aid inflows to scale up spending on priority sectors, including infrastructure, in line with the objectives outlined in the Economic Development and Poverty Reduction Strategy Paper (EDPRS). Through mid-2009, revenues beyond those projected in the budget will be saved for future use.

"Monetary policy should aim to mitigate the shocks from sharp fluctuations in the world commodity prices and bring back inflation to single-digit levels, including through exchange rate flexibility and close coordination of monetary and fiscal policy.

"We welcome the progress and the continued resolve of the authorities to pursue broad-based structural reforms, particularly in the areas of public financial management, tax administration, and financial sector reform.

"The mission wishes to thank the authorities for their excellent cooperation."



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