IMF Executive Board Completes Fifth Review under PRGF with Rwanda and Approves US$1.7 Million Disbursement

Press Release No. 09/07
January 12, 2009

The Executive Board of the International Monetary Fund (IMF) today competed the fifth review of Rwanda's economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review enables the immediate disbursement of an amount equivalent to SDR 1.14 million (about US$1.7 million), bringing total disbursements under the arrangement to SDR 6.84 million (about US$10.4 million).

The Executive Board also granted a waiver for the nonobservance of a structural performance criterion for end-June 2008 related to publication of the Public Financial Management reform action plan for 2008-10. The action plan was published with a delay in September 2008.

The Executive Board also concluded the 2008 Article IV consultation with Rwanda. Details of the findings will be published in a Public Information Notice.

The three-year PRGF arrangement for Rwanda was approved by the Executive Board in June 2006 (see Press Release No. 06/121) in an amount equivalent to SDR 8.01 million (about US$12.2 million).

Following the Executive Board's discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, said:

"The Rwandan authorities have continued to implement strongly their economic program in 2008. Economic growth accelerated and external public debt sustainability improved. While inflation increased in the second half of the year due to increases in world food and fuel prices and domestic demand pressures, preliminary signs of easing core inflation are encouraging. The medium-term outlook remains favorable, even though risks of contagion from the deteriorating external environment have increased.

"In 2009, the main challenges will be to mitigate the impact of the world economic crisis on the local economy, reduce inflation further and cope with possible balance of payments pressures without jeopardizing economic growth. To this effect, the authorities aim to continue to implement cautious and coordinated fiscal and monetary policies, as well as structural reforms that will help raise investment rates, expand the private sector, deepen the financial sector, and diversify the production and export base. These measures should make it possible for Rwanda to take full advantage of the recent steep decline in world commodity prices to lower inflation.

"The authorities intend to continue to rely mostly on grants and highly concessional borrowing in order to safeguard debt sustainability. Borrowing decisions will be guided by the new debt management strategy and a medium-term public expenditure management framework. Infrastructure projects that are needed to alleviate bottlenecks to private sector growth should be carefully evaluated on a case-by-case basis in terms of their cost effectiveness and impact on the public debt.

"Sustaining high growth and reducing poverty requires that Rwanda accelerate the breadth and pace of structural reforms, while maintaining the focus on improving public service delivery and creating a vibrant private sector. The ongoing and planned reforms in public financial management are encouraging, and will be essential to ensure that public resources are allocated efficiently. Enlarging the local tax base and improving tax administration will be key to increasing revenue collection and reducing aid dependence over time," Mr. Portugal said.

The PRGF is the IMF's concessional facility for low-income countries. It is intended that PRGF-supported programs are 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 (PRSP). This is intended to ensure that PRGF-supported programs are 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 5½-year grace period on principal payments.



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