Statement by IMF Staff Mission to Rwanda

Press Release No. 09/194
June 2, 2009

An International Monetary Fund (IMF) mission led by Ms. Zuzana Murgasova visited Kigali during May 18-29, 2009 to conduct the sixth review of Rwanda's three-year program supported by the Poverty Reduction and Growth Facility (PRGF) and to discuss economic policies for 2009/10. 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 at the conclusion of their visit:

“The global economic and financial crisis is now beginning to impact Rwanda. Economic growth is projected to weaken from 11.2 percent in 2008 to about 5.3 percent in 2009 and 2010. A robust expansion in agriculture is expected to partly offset the slowdown in construction, mining, and services over the coming year. The world economic crisis will likely result in falling exports, smaller foreign direct investment inflows, and lower tax revenues. In the medium term, growth is expected to rebound to 6 percent with the improvement in the external environment. At the same time, the balance of payments is likely to improve, while international reserves are projected to stabilize at around 4 months of imports. Downside risks would arise if the global crisis became deeper or more prolonged than currently envisaged.

“Inflation is expected to decline to single digits in the second half of 2009. This will result largely from a reduction in import prices, lower domestic food prices, and an easing of domestic demand pressures. Headline inflation already fell from 22 percent at end-2008 to about 13½ percent in April 2009. At the same time, continued prudent fiscal and monetary management will be required to anchor inflation expectations to single digits in future.

“Fiscal policy will have to balance the competing objectives of cushioning the impact of the global recession on growth and poverty reduction, and preserving medium-term fiscal and external sustainability. The mission supports the proposed expansion of the budget deficit in 2009/10, requiring a use of government deposits in the central bank of up to 1 percent of GDP. The proposed budget provides a necessary stimulus to the economy without compromising the government’s inflation and debt sustainability objectives.

“Liquidity pressures in the banking system have emerged in 2009, leading to prospects of weakening of credit to the private sector. Going forward, appropriately-designed policy measures may be needed to stimulate bank lending consistent with the near- and medium-term growth objectives.

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



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