June 8, 2016
IMF COMMUNICATIONS DEPARTMENT |
| Media Relations |
|---|
| E-mail: media@imf.org |
| Phone: 202-623-7100 |
On June 8, 2016, the Executive Board of the International Monetary Fund (IMF) completed the fifth review of Rwanda’s economic performance under the program supported by the Policy Support Instrument (PSI)1 and approved an 18-month arrangement under the Standby Credit Facility (SCF)2 for SDR 144.18 million (about US$204 million or 90 percent of Rwanda’s quota). In completing the review, the Board granted a waiver for a minor and temporary nonobservance of an assessment criteria on the non-accumulation of external arrears. The Board also approved the extension of the current PSI up to the end of 2017.
The SCF will complement the authorities’ efforts to address growing external imbalances, by boosting reserves, with a first SDR 72.09 million disbursement (about US$102 million) available immediately. Both near and medium term adjustment policies to position Rwanda’s external position on a sustainable basis will form part of an overall strategy to support growth, support poverty reduction and improve the country’s resilience to future uncertainties in the global economy.
The Executive Board approved the PSI for Rwanda on December 2, 2013 (see Press Release No.13/483).
Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Rwanda’s continued strong performance under the Policy Support Instrument has created a platform for high growth and steady poverty reduction. Growth in 2015 was buoyed by strong construction and services activity, while inflation remained contained.
“Nevertheless, the situation has grown more challenging in recent months due to external shocks related to commodity prices and tighter conditions for private inflows. Combined with the appreciation of the U.S. dollar, these have reduced export receipts and put downward pressure on the exchange rate and official reserves.
“Accordingly, the authorities are taking decisive steps to address external imbalances; first and foremost, through using continued exchange rate flexibility as the principal adjustment tool. This will be supported by tighter fiscal and monetary policies to help curb demand for imports. Implementation of these policies should maintain GDP growth of around 6 percent in both 2016 and 2017, while IMF financing under the Standby Credit Facility will help bolster reserves. The authorities are also accelerating policies to diversify and promote higher value exports, which should help strengthen the country’s medium-term growth prospects and its resilience to future shocks.
“Downside risks to growth and the program remain: for example, should further shocks to commodity prices or regional and weather-related developments materialize, additional adjustment policies would need to be put in place rapidly.”
Annex
Recent economic developments
Despite the drop in global commodity prices, Rwanda’s growth remained strong in 2015, with a GDP rate of 6.9 percent. Mining exports dropped by almost half in 2015, leading to a significant loss in foreign exchange earnings. As such, the current account deficit has also worsened, from a deficit of 16.4 percent in 2014 to a deficit of 18.1 percent in 2015. The growth outlook for 2016–17 has also become more uncertain.
Consumer price inflation remained contained, averaging 2.5 percent for the year, though it increased in the second half of 2015 due to higher food prices and administrative increases in utility prices. Monetary policy remained largely accommodative through end-2015 but was tightened in the first quarter of 2016.
Despite these developments, macroeconomic policy performance through December 2015 remained in line with the PSI program objectives. Most targets were met and were also supported by structural reforms, notably changes to boost domestic revenue collection, reduce liquidity overhangs, strengthen financial market supervision and functioning, and improve domestic revenue collection. Planned measures to revise the property tax law and improve the timeliness of public reporting on budget execution are taking longer than anticipated.
Program summary
The existing PSI and new SCF arrangement will support the country’s efforts to address growing external imbalances, thereby supporting continued strong growth and durable poverty reduction. The SCF arrangement adds a financing component to the existing PSI-supported program, which aims to promote private-sector led growth through safeguarding macroeconomic stability, including through external sustainability, fiscal sustainability based on continued improvements in domestic resource collection, low and stable inflation, and enhancing access to credit and deepening the financial sector.
| Rwanda: Selected Economic Indicators, 2014 – 2018 | |||||||
| 2014 | 2015 | 2016 | 2017 | 2018 | |||
| Act. | Est. | Proj. | Proj. | Proj. | |||
|
Output, prices, and exchange rate |
|||||||
|
Real GDP |
7.0 | 6.9 | 6.0 | 6.0 | 7.0 | ||
|
GDP deflator |
3.7 | 1.2 | 4.4 | 4.6 | 4.8 | ||
|
CPI (period average) |
1.8 | 2.5 | 4.6 | 4.9 | 5.0 | ||
|
CPI (end of period) |
2.1 | 4.5 | 4.7 | 5.0 | 5.0 | ||
|
Core inflation (end of period)1 |
2.9 | … | … | … | … | ||
|
Terms of trade (deterioration, -) |
1.9 | 2.2 | -1.1 | -0.9 | -0.7 | ||
|
Money and credit |
|||||||
|
Broad money (M3) |
19.0 | 21.1 | 15.4 | 15.6 | 15.1 | ||
|
Credit to non-government sector |
19.6 | 26.8 | 16.0 | 16.0 | 19.5 | ||
|
Policy Rate (end of period) |
6.5 | 6.5 | … | … | … | ||
|
M3/GDP (percent) |
22.7 | 25.4 | 26.5 | 27.6 | 28.3 | ||
|
NPLs (percent of total loans) |
6.0 | … | … | … | … | ||
|
General government budget |
|||||||
|
Revenue and grants |
24.0 | 25.0 | 23.8 | 23.3 | 23.5 | ||
|
of which: tax revenue |
15.0 | 15.9 | 16.0 | 16.1 | 16.3 | ||
|
of which: grants |
7.4 | 6.4 | 5.6 | 5.2 | 5.2 | ||
|
Expenditure |
27.6 | 28.1 | 26.8 | 25.0 | 25.0 | ||
|
Current |
15.0 | 14.8 | 14.3 | 14.8 | 14.1 | ||
|
Capital |
12.6 | 13.3 | 12.5 | 10.2 | 10.9 | ||
|
Primary balance |
-4.2 | -4.1 | -3.8 | -2.4 | -2.0 | ||
|
Overall balance |
-4.9 | -5.0 | -4.7 | -3.3 | -3.0 | ||
|
Public debt |
|||||||
|
Total public debt |
29.3 | 35.4 | 44.5 | 48.5 | 49.4 | ||
|
of which: external public debt |
23.6 | 28.5 | 37.5 | 41.4 | 44.4 | ||
|
Investment and savings |
|||||||
|
Investment |
25.2 | 25.7 | 28.9 | 25.4 | 25.6 | ||
|
Public |
12.6 | 13.3 | 12.5 | 10.2 | 10.9 | ||
|
Private |
12.6 | 12.4 | 16.4 | 15.2 | 14.7 | ||
|
Savings2 |
8.9 | 7.6 | 7.7 | 9.2 | 11.5 | ||
|
External sector |
|||||||
|
Exports (goods and services) |
16.9 | 17.3 | 16.7 | 17.6 | 18.4 | ||
|
Imports (goods and services)3 |
33.5 | 34.9 | 37.3 | 33.3 | 32.2 | ||
|
Current account balance (including grants) |
-10.5 | -13.5 | -16.5 | -12.0 | -10.2 | ||
|
Current account balance (excluding grants) |
-16.4 | -18.1 | -21.2 | -16.1 | -14.1 | ||
|
Gross international reserves |
|||||||
|
In billions of US$ |
1.0 | 0.9 | 0.8 | 0.6 | 0.7 | ||
|
In months of next year's imports |
4.2 | 3.6 | 3.2 | 2.5 | 2.9 | ||
|
Memorandum items: |
|||||||
|
GDP at current market prices |
|||||||
|
Rwanda francs (billion) |
5,394 | 5,837 | 6,459 | 7,164 | 8,031 | ||
|
US$ (billion) |
7.9 | 8.1 | … | … | … | ||
|
GDP per capita (US$) |
719 | 718 | … | … | … | ||
|
Population (million) |
11.0 | 11.3 | 11.5 | 11.8 | 12.1 | ||
|
Sources: Rwandan authorities and IMF staff estimates. | |||||||
|
1 Defined as excluding food and fuel. | |||||||
|
2 The savings rate excludes grants. | |||||||
|
3 Imports for 2016 reflect purchases of two aircrafts. | |||||||
1 The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF's Executive Board, signal to donors, multilateral development banks, and markets the Fund's endorsement of a member's policies (see http://www.imf.org/external/np/exr/facts/psi.htm). Details on Rwanda’s current PSI are available at www.imf.org/rwanda. 2 The SCF provides financing to low-income countries on concessional terms. For more details, see http://www.imf.org/external/np/exr/facts/scf.htm. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
