## 1. The Economic Impact of the COVID-19 Pandemic on Rwanda

## Source details

**Canonical URL:** [1. The Economic Impact of the COVID-19 Pandemic on Rwanda](https://www.imf.org/-/media/files/publications/cr/2020/english/1rwaea2020002.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2020/english/1rwaea2020002.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2020/english/1rwaea2020002.pdf.json)

---

### Context
- Pre-pandemic performance:
  - GDP grew in double digits over the first three quarters of 2019.
  - Headline inflation trending up; within authorities’ band.
  - Foreign exchange reserves remained adequate despite a widening current account deficit.
  - Budget pressures from unusually heavy rains; revised budget in February increased the headline deficit to finance disaster-management outlays and accelerated foreign-financed infrastructure projects.
  - Performance under the PCI-supported program reported as strong with preliminary progress toward end-December 2019 targets.
- Key project and financing note:
  - Bugesera airport construction: Construction planned 2020–24 at a cost of US$ 1.3 billion; expected to contribute to growth by at least 2 percentage points.

### Initial Impact and Response
- Epidemiological snapshot:
  - As of March 26, Rwanda has reported 50 cases of COVID-19 infection.
- Channels of economic impact:
  - Trade and supply chain disruptions; more than 20 percent of Rwandan imports are sourced in China.
  - Tourism sharply affected: suspension of flights, closure of Kigali International Airport, cancellation of hotel and conference bookings; export earnings from tourism and business travel expected to fall significantly in 2020.
  - Spillovers to retail, transport, manufacturing, and construction from delayed deliveries and shortages of imported inputs and capital goods.
  - Public finances strained: lower revenues from international trade taxes and VAT; non-tax revenues (e.g., fees from national parks) declined.
  - Banking sector: resilient so far but elevated exposure to hotels and import-dependent sectors, with risks to asset quality and profitability.
- Government response measures:
  - Early containment: communication campaigns, systematic screening at borders, selective flight suspensions; intensive care units upgraded.
  - Social distancing: closure of schools and places of worship, cancellation of public gatherings, teleworking, domestic movement restrictions; later a full lockdown with all borders closed including Kigali airport, strict movement restrictions, and closure of markets, shops, and bars for two weeks.
- International support:
  - World Bank expected to provide budget support of around USD 59 million and health project financing of USD 14.25 million by end-April.
  - Other development partners expected to provide support.

### Outlook and Risks
- Growth impact and outlook:
  - The economic impact is projected to be large but temporary.
  - Growth expected to be reduced significantly in 2020; services—especially tourism—will bear the brunt.
  - Growth is projected to decline by 50 percent in 2020 compared to 2019, returning to pre-Pandemic levels only in 2022.
  - Recovery depends on sustained implementation of public and private investment projects and timely start of new international airport construction.
- Fiscal outlook:
  - Debt projected to remain at above 60 percent of GDP through 2021 and decline afterwards.
- External sector and reserves:
  - External accounts will deteriorate markedly: total imports projected to decline (lower import prices, fuel) but services receipts—especially tourism—will fall; marked falls in traditional exports (tea, coffee, minerals) and remittances.
  - Depressed investment sentiment expected to temporarily halt FDI and other capital inflows.
  - Without substantial financing, central bank foreign reserves could fall below 3 months of prospective imports cover in 2020 (Rwanda’s adequate level is 4‒5 months of imports cover).
  - With concerted support, official reserves could be maintained at about 3.5 months of prospective imports over the next few years.
- Risks:
  - Downside risks dominate: protracted or recurrent global or regional Pandemic would deepen and delay recovery.
  - Domestic downside risks: slow recovery of business tourism, realization of government guarantees, spending pressures from protracted recovery, possible cancellation of the Bugesera airport project, unpredictable weather, regional locust invasion.
  - Upside risks: quick resumption of public and private investments and timely start of the new airport construction.

### Fiscal Policy: Impact, Financing, and Recommendations
- Estimated cost of the Pandemic:
  - Total cost projected at 3.4 percent of GDP over the next two years, including revenue losses of 1.9 percent of GDP and increases in public spending of 1.5 percent of GDP.
  - Public spending expected to be equally allocated between health measures and economic mitigation.
- Fiscal balances and program implications:
  - The debt-creating fiscal deficit (excluding PKO) would increase relative to program targets by 2.2 and 1.5 ppts of GDP in FY 19/20 and FY 20/21, respectively.
  - Headline and debt-creating budget balance expected to conform to the current fiscal rule only by FY 21/22; the end-June deficit target under the program expected to be missed by a large margin.
- Fiscal financing gap and prospective support:
  - Preliminary analysis indicates a fiscal financing gap of about 3.7 percent of GDP over the current fiscal year and the next.
  - Prospective financing assumptions reduce the FY 19/20 gap by 1 percent of GDP from RCF financing and by 0.7 percent of GDP from prospective World Bank financing, leaving residual gaps for FY 19/20 and FY 20/21 of 0.5 and 1.5 percent of GDP, respectively.
- Authorities’ measures under consideration:
  - Prioritization of public health and social spending in the current and FY 20/21 budget.
  - Support for affected households and firms via subsidized loans and debt restructuring to hospitality and other hard-hit sectors, SMEs, and individuals are under consideration.
- IMF staff advice and recommendations:
  - Staff supports allowing the fiscal deficit to increase temporarily and the suspension of the program fiscal rule given the extraordinary nature of the Pandemic.
  - Additional relaxation could be envisaged if the crisis worsens and financing is available.
  - Staff will advise on targeted, cost-effective support measures that do not crowd out other priorities, preparation of contingency plans, and introducing an escape clause in the program fiscal rule for specific shocks.
  - Highlighted need to closely monitor and manage existing fiscal risks and the materialization of government guarantees.
- Debt sustainability:
  - Rwanda’s debt assessed to remain sustainable with a low risk of debt distress under the Pandemic shock.
  - Customized stress test indicates Rwanda remains at a low risk of debt distress even under the significantly negative outlook; a one-off breach in the PV of debt-to-export ratio in 2020 was modeled but not interpreted as changing the LIC-DSF risk rating given its one-year duration.

### Monetary, Financial, and Exchange Rate Policies
- BNR liquidity and credit support measures:
  - Extended lending facility: RWF 50 billion available to liquidity-constrained banks for the next six months, starting March 18; banks can borrow at the policy rate with longer maturities.
  - Treasury bond purchases through the rediscount window for the next six months.
  - Reserve requirement ratio lowered by 100 basis points, from 5 to 4 percent, effective from April 1.
  - BNR stands ready to extend the liquidity support period if warranted and is in close discussions with the Ministry of Finance and Economic Planning on supporting microfinance institutions and their clients.
- Monetary policy, inflation, and guidance:
  - Headline inflation reached 8.7 percent y/y as of February (picked up since 2019Q4).
  - Staff recommendation: monetary policy should be data-driven; BNR should closely monitor price developments and stand ready to act.
  - Exchange rate flexibility is key as a shock absorber and would support the nascent interest rate-based monetary policy framework.
- Financial system soundness and supervisory guidance:
  - Financial system broadly healthy but threatened by the Pandemic; lending concentrated in real estate, trade, manufacturing, and transport.
  - Staff welcomes allowing banks to restructure outstanding loans of affected borrowers but urges:
    - Prudential renegotiation without lowering loan classification and provisioning standards.
    - Introduction of strict criteria for acceptable loan restructuring.
    - Step up reporting requirements for affected loans.
    - Regular portfolio reviews and risk assessments.
- Digital payments and containment measures:
  - Charges on electronic money transactions waived for three months, effective from March 19:
    - Cost of transfers between bank accounts and mobile wallets.
    - Cost of mobile money transfers.
    - Merchant fees on digital transactions.
  - Limits on individual transfers using mobile money wallets will be raised.
- Exchange rate policy and reserves:
  - Maintain exchange rate flexibility; limit foreign exchange market interventions to avoid excessive volatility.
  - Preserving adequate international reserve cover emphasized.

### Access to Fund financing and capacity to repay
- RCF request and modality:
  - Authorities request disbursement under the RCF “exogenous shock” window equivalent to 50 percent of quota (SDR 80.1 million or US$ 109.4 million).
  - Request that financing be made available in its entirety as budget support.
  - Disbursement to provide timely support for urgent fiscal needs and additional foreign exchange to avoid a sharp drop in international reserves.
  - Balance of payments difficulties necessitating the RCF request caused primarily by a sudden exogenous shock and expected to be resolved within the next 12 months without major policy adjustments.
- Capacity to repay and safeguards:
  - Rwanda’s capacity to repay the Fund is adequate.
  - Total outstanding credit from the Fund, once the RCF is disbursed, will amount to 130 percent of quota.
  - Total obligations to the Fund would remain below 1.5 percent of exports of goods and services, 1.9 percent of government revenue, and up to 3.4 percent of gross international reserves.
  - Authorities signed a framework agreement between the government and BNR on roles and responsibilities for servicing Fund obligations.
  - Authorities committed to an update of the safeguards assessment before Board approval of any subsequent arrangement; last safeguards assessment was undertaken in 2016 and recommendations have been implemented; BNR continues to publish audited financial statements.

### Staff appraisal, support, and final guidance
- Staff assessment:
  - Rapid deterioration of the short-term outlook due to containment and mitigation measures; Rwanda feeling the brunt of the Pandemic.
  - Staff welcomes the authorities’ swift response to contain and mitigate the virus.
- Staff support:
  - Supports temporary suspension of the fiscal rule to allow fiscal deficit increase for scaling up health care spending and targeted support.
  - Supports BNR measures to provide additional liquidity support, easing of loan repayment conditions, and elimination of charges related to digital channels and mobile payments.
  - Reiterated: monetary policy data-driven; exchange rate flexibility as shock absorber; limit FX interventions to avoid excessive volatility.

### Staff conclusion and RCF endorsement
- Staff supports the authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR80.1million (50 percent of quota).
- Support rationale:
  - Severity of the Pandemic’s impact.
  - Authorities’ existing and prospective policies to address the external shock.
  - Urgent balance of payments need.
  - Authorities’ policy commitments to fiscal prudence and strong track record, which will mitigate risks for the Fund.

### Key macroeconomic projections and selected indicators (annual percentage change or levels as indicated)
- Real GDP (annual percent): 2018: 8.6; 2019: 8.5; 2020: mixed entries across table including 10.1, 8.0, 5.1, 8.0, 6.7, 8.0 (table shows multiple columns across years and revisions).
- CPI (period average): entries include 1.4, 2.3, 2.4, 5.4, 6.9, 5.0, 5.4, 5.0.
- Headline inflation (end period): entries include 1.1, 5.7, 6.7, 5.0, 5.0, 5.0, 5.0, 5.0.
- Total public debt incl. guarantees (percent of GDP): selected entries include 53.1, 59.0, 58.4, 58.9, 64.5, 59.8, 66.4, 65.7.
- Gross official reserves (Millions of U.S. dollars): 1,319; 1,367; 1,440; 1,553; 1,000; 1,654; 1,160; 1,330.
  - In months of next year's imports of G&S: 4.7; 4.4; 5.4; 4.6; 2.9; 4.6; 3.0; 3.3.
- External current account balance (Millions of U.S. dollars): 2018: -756; 2019: -1,068; 2020 (Proj.): -1,728; 2021 (Proj.): -1,191; 2022 (Proj.): -1,243.
- Tourism receipts (of services credit, Millions of U.S. dollars): 2018: 375; 2019: 405; 2020 (Proj.): 82; 2021 (Proj.): 512; 2022 (Proj.): 509; 2023 (Proj.): 535.
- Financing assumptions:
  - Table 6 assumes access of 50.0 percent of the quota in April 2020 as one-time disbursement (reflected as 109 in 2020 in the table).
  - Prospective World Bank financing shown as 73 in Table 6 projections for 2020.
  - External financing gap due to the Pandemic: US$213 million (memorandum in Annex).

### Selected fiscal and budgetary levels (Billions of Rwandan francs, FY17/18–FY21/22 entries)
- Revenue and grants (examples of entries): 1,820; 2,065; 2,250; 2,272; 2,139; 2,551; 2,463; 2,848; 2,848.
  - Total revenue entries include: 1,462; 1,670; 1,847; 1,869; 1,736; 2,065; 1,977; 2,342; 2,342.
  - Tax revenue entries include: 1,253; 1,419; 1,591; 1,601; 1,468; 1,828; 1,752; 2,090; 2,090.
- Total expenditure and net lending entries include: 2,188; 2,611; 2,942; 3,065; 3,145; 3,169; 3,239; 3,516; 3,516.
  - Current expenditure examples: 1,177; 1,343; 1,455; 1,498; 1,548; 1,626; 1,670; 1,793; 1,793.
  - Capital expenditure examples: 850; 1,072; 1,160; 1,236; 1,266; 1,322; 1,348; 1,492; 1,492.
- Overall balance (incl. grants, commitment basis) (Billions of Rwandan francs): -367; -546; -691; -792; -1,006; -618; -777; -668; -668.

### Annex I — Debt Sustainability Analysis Update (summary)
- Risk ratings:
  - Risk of external debt distress: Low.
  - Overall risk of debt distress: Low.
- COVID-19 customized stress test shocks (compared to previous DSA baseline):
  - Real GDP growth shock: -2.6 percentage points in 2020.
  - Primary balance shock: -3.2 percentage points in 2020 (percent of GDP).
  - Exports shock: -9.7 percentage points in 2020.
- Consequences:
  - Produces a one-off breach to the PV of debt-to-exports ratio in 2020.
  - All other external and public debt burden indicators remain under thresholds under baseline and stress tests, except one-off breaches in external debt service indicators in 2023 when the Eurobond issued in 2013 matures.
  - One-year breaches are discounted per LIC-DSF guidance.
- Selected DSA indicators (examples):
  - External debt (nominal) percent of GDP entries: 2016: 43.8; 2017: 46.4; 2018: 50.0; 2019: 51.3; 2020: 53.0; 2021: 54.3; 2022: 54.8.
  - PV of PPG external debt-to-exports ratio (selected years): 2019: 138.4; 2020: 138.0; 2021: 132.9; 2029: 106.1.
  - PV of public debt-to-GDP ratio (selected years): 2019: 42.9; 2020: 42.7; 2021: 41.6; 2029: 47.2.

### Sensitivity analysis highlights (selected)
- PV of debt-to-GDP (percent) under scenarios:
  - Baseline (selected entries): 2019: 29.4; 2020: 29.6; 2021: 29.4; 2029: 33.0.
  - COVID-19 pandemic (A2): 2019: 29.4; 2020: 32.5; 2021: 31.3; 2029: 34.4.
  - Bound test B6 (one-time 30 percent nominal depreciation): 2019: 29.4; 2020: 37.4; 2029: 39.8.
- PV of debt-to-exports ratio under COVID-19 (A2):
  - 2019: 138.6; 2020: 277.9 (one-off jump); 2021: 138.6; 2029: 130.8.
- Debt service-to-exports ratio under COVID-19 (A2):
  - 2019: 9.0; 2020: 19.5; 2021: 13.3; 2029: 7.8.
- Notation:
  - One-off breaches (e.g., large 2020 jump in PV debt-to-exports under COVID-19) are presented but treated as excluded for mechanical signaling per LIC-DSF guidance.

### Additional projections and program notes (selected from Letter of Intent and staff report)
- Real GDP growth projection: 10.1 percent in 2019; projected 5.1 percent in 2020 (pre-pandemic projection of 8 percent).
- Inflation: average 6.9 percent in 2020 compared to 2.4 percent in 2019.
- Fiscal revenue shortfalls: 1.3 percent of GDP in FY 2019/20 and 0.5 percent of GDP in FY 2020/21.
- Estimated total cost of emergency response plan: RWF150 billion over two years (or 0.8 percent of GDP in FY2019/20 and 0.6 percent of GDP in FY 2020/21).
- Public finances: pandemic-related cost estimated at 3.4 percent of GDP total over the next two years, adding 2.2 and 1.5 ppts of GDP in FY 19/20 and FY 20/21 respectively to programmed debt-creating fiscal deficits (excluding Peace Keeping Operations).
- Current account and external finances:
  - Current account deficit projected to widen by 16 percent of GDP compared to 9.9 percent of GDP projected at the time of the first review of the PCI.
  - External financing gap due to the Pandemic: US$213 million.
- IMF assistance request:
  - Emergency financing under the Rapid Credit Facility (RCF) in the amount of SDR80.1 million, equivalent to 50 percent of Rwanda’s quota; disbursement as direct budget support to the Ministry of Finance and Economic Planning’s account at BNR.
- Central bank (BNR) policy measures reiterated:
  - Extended lending facility: RWF 50 billion for six months.
  - Rediscount purchases of Treasury bonds for six months.
  - Reserve requirement lowered from 5 to 4 percent effective April 1.
  - Temporary elimination of charges related to digital channels and mobile payments.
  - Allowance for banks to prudently restructure outstanding loans of affected borrowers, with recommendations to preserve loan classification and provisioning standards.
- Balance of payments and reserves:
  - Absent support, reserves projected to fall below 3 months of prospective imports cover in 2020 (below adequate level of 4‒5 months).

*Source: 1rwaea2020002 — IMF staff report and Annexes (selected tables and text).*

### 1. The Economic Impact of the COVID-19 Pandemic on Rwanda ______________________________ 4

### 1. The Economic Impact of the COVID-19 Pandemic on Rwanda

### Context
- Rwanda experienced a strong expansion prior to the Pandemic: GDP grew in double digits over the first three quarters of 2019.
- Headline inflation was within authorities’ band but trending up due to a shortage in food supply and stronger domestic demand.
- Foreign exchange reserves remained adequate despite a widening current account deficit driven by adverse terms of trade and stronger demand for capital goods.
- Budget pressures were already mounting owing to unusually heavy rains; Parliament approved a revised budget in February that increased the headline deficit to finance disaster-management outlays and accelerated foreign-financed infrastructure projects.
- Performance under the PCI-supported program was reported as strong with preliminary progress toward end-December 2019 targets.

*Key project and financing notes from context*
- The Bugesera airport construction: Construction was to take place from 2020–24 at a cost of US$ 1.3 billion and was expected to contribute to growth by at least 2 percentage points.

### Initial Impact and Response
- Epidemiological snapshot: As of March 26, Rwanda has reported 50 cases of COVID-19 infection.
- Channels of impact:
  - Trade and supply chains disrupted, particularly from factory shutdowns in China (more than 20 percent of Rwandan imports are sourced in China).
  - Tourism sharply affected by suspension of flights, closure of Kigali International Airport, cancellation of hotel and conference bookings; export earnings from tourism and business travel expected to fall significantly in 2020.
  - Spillovers to retail, transport, manufacturing, and construction from delayed deliveries and shortages of imported inputs and capital goods.
  - Public finances strained by lower-than-expected revenues from international trade taxes and VAT; non-tax revenues (e.g., fees from national parks) declined.
  - Banking sector resilient so far but faces elevated exposure to hotels and import-dependent sectors, with risks to asset quality and profitability.
- Government response:
  - Early containment: communication campaigns, systematic screening at borders, selective flight suspensions.
  - Health system: intensive care units upgraded.
  - Social distancing: closure of schools and places of worship, nationwide cancellation of public gatherings, teleworking, domestic movement restrictions; later a full lockdown with all borders closed including Kigali airport, strict movement restrictions, and closure of markets, shops, and bars for two weeks.
- International support:
  - World Bank expected to provide budget support of around USD 59 million and health project financing of USD 14.25 million by end-April.
  - Other development partners expected to provide support.

### Outlook and Risks
- Growth impact:
  - The economic impact is projected to be large but temporary.
  - Growth is expected to be reduced significantly in 2020; the services sector—especially tourism—will bear the brunt.
  - Growth is projected to decline by 50 percent in 2020 compared to 2019, returning to pre-Pandemic levels only in 2022.
  - Recovery depends on sustained implementation of public and private investment projects and timely start of new international airport construction.
- Fiscal outlook:
  - Debt is projected to remain at above 60 percent of GDP through 2021 and decline afterwards.
- External sector:
  - External accounts will deteriorate markedly: total imports projected to decline (lower import prices, fuel) but decline in services receipts—especially tourism—plus marked falls in traditional exports (tea, coffee, minerals) and remittances.
  - Depressed investment sentiment expected to temporarily halt FDI and other capital inflows.
- Reserve adequacy and balance of payments:
  - Without substantial financing, central bank foreign reserves could fall below 3 months of prospective imports cover in 2020 (Rwanda’s adequate level is 4‒5 months of imports cover).
  - With concerted support, official reserves could be maintained at about 3.5 months of prospective imports over the next few years.
- Risks:
  - Downside risks dominate: a protracted or recurrent global or regional Pandemic would deepen and delay recovery, with negative implications for growth, the external sector, and public finances.
  - Domestic downside risks: slow recovery of business tourism, realization of government guarantees, spending pressures from protracted recovery, possible cancellation of the Bugesera airport project, unpredictable weather, and regional locust invasion.
  - Upside risks: quick resumption of public and private investments and timely start of the new airport construction.

### Fiscal Policy: Impact, Financing, and Recommendations
- Estimated cost of the Pandemic:
  - Staff and authorities project the total cost of the Pandemic to amount to 3.4 percent of GDP over the next two years, including revenue losses of 1.9 percent of GDP and increases in public spending of 1.5 percent of GDP.
  - Public spending expected to be equally allocated between health measures and economic mitigation.
- Fiscal balances and program implications:
  - The debt-creating fiscal deficit (excluding PKO) would increase relative to program targets by 2.2 and 1.5 ppts of GDP in FY 19/20 and FY 20/21, respectively.
  - The headline and debt-creating budget balance are only expected to conform to the current fiscal rule by FY 21/22; the end-June deficit target under the program is expected to be missed by a large margin.
- Fiscal financing gap and prospective support:
  - Preliminary analysis indicates a fiscal financing gap of about 3.7 percent of GDP over the current fiscal year and the next.
  - Prospective financing assumptions reduce the FY 19/20 gap by 1 percent of GDP from RCF financing and by 0.7 percent of GDP from prospective World Bank financing, leaving residual gaps for FY 19/20 and FY 20/21 of 0.5 and 1.5 percent of GDP, respectively.
- Authorities’ measures under consideration:
  - Prioritization of public health and social spending in the current and FY 20/21 budget.
  - Support for affected households and firms via subsidized loans and debt restructuring to hospitality and other hard-hit sectors, SMEs, and individuals are under consideration.
- IMF staff position and policy advice:
  - Staff supports allowing the fiscal deficit to increase temporarily and the suspension of the program fiscal rule given the extraordinary nature of the Pandemic.
  - Additional relaxation could be envisaged if the crisis worsens and financing is available.
  - Staff will continue to advise on targeted, cost-effective support measures that do not crowd out other priorities, on preparing contingency plans if the situation deteriorates, and on introducing an escape clause in the program fiscal rule to address specific shocks.
  - Staff highlighted the need to closely monitor and manage existing fiscal risks and the materialization of government guarantees.
- Debt sustainability:
  - Rwanda’s debt is assessed to remain sustainable with a low risk of debt distress under the Pandemic shock (Annex I).
  - A customized stress test to the recent DSA indicates Rwanda remains at a low risk of debt distress even under the significantly negative outlook; a one-off breach in the PV of debt-to-export ratio in 2020 was modeled but not interpreted as changing the LIC-DSF risk rating given its one-year duration in the outlook.

### Monetary, Financial, and Exchange Rate Policies
- Liquidity and credit support from National Bank of Rwanda (BNR):
  - BNR created an extended lending facility worth RWF 50 billion available to liquidity-constrained banks for the next six months, starting March 18; banks can borrow at the policy rate with longer maturities.
  - BNR will engage in Treasury bond purchases through the rediscount window for the next six months.
  - The reserve requirement ratio will be lowered by 100 basis points, from 5 to 4 percent, effective from April 1.
  - BNR stands ready to extend the liquidity support period if warranted and is in close discussions with the Ministry of Finance and Economic Planning on supporting microfinance institutions and their clients.

*International Monetary Fund staff report discussions held via Teleconference on March 20 and March 25, 2020; staff team included H. Teferra (head), V. Lledo, M. Woldemichael, K. Gyesaw, S. Kaihatsu, and S. Mbaye, assisted by L. Nankunda; approved by Zeine Zeidane (AFR) and Zuzana Murgasova (SPR).*

*Source: 1. The Economic Impact of the COVID-19 Pandemic on Rwanda (IMF staff report).*

### 18.      Staff welcomes BNR’s steps in response to the unfolding crisis and recommends

### 1rwaea2020002 - 18.      Staff welcomes BNR’s steps in response to the unfolding crisis and recommends

### Monetary policy, inflation, and guidance
- Headline inflation has been picking up since 2019Q4, reaching 8.7 percent y/y as of February.
- Drivers and risks:
  - Supply shocks amid negative weather conditions have contributed to higher inflation.
  - Post-Pandemic shortages of imported goods are expected to fuel more inflation.
  - Exchange rate pressures and fiscal loosening in response to the Pandemic could exert upward pressure on prices.
  - Lower oil prices could be disinflationary.
  - The economic slowdown could alleviate demand pressures on prices.
- Staff recommendation:
  - Monetary policy should be data-driven.
  - BNR should continue to closely monitor price developments and stand ready to act as needed.
  - Exchange rate flexibility is key as a shock absorber and would support the nascent interest rate-based monetary policy framework.

### Financial system soundness and bank-sector risks
- Current assessment:
  - The financial system is broadly healthy, but the Pandemic threatens its soundness.
  - Bank lending is concentrated in real estate, trade, manufacturing, and transport sectors, which are experiencing supply chain and business disruptions.
- Vulnerabilities:
  - Banks’ earnings and asset quality could be undermined if the Pandemic impairs borrowers’ capacity to service loans.
  - Banks with elevated credit concentration risk for single obligor could be more vulnerable.
  - Counterparty risk from off-balance sheet guarantees (sizeable in Rwanda’s banking system) could materialize and strain domestic systemic banks; examples include unused lines of credit, overdraft facilities, and performance bonds used to support construction projects.

### Loan restructuring and supervisory measures
- BNR decision:
  - Exceptionally allow banks to restructure outstanding loans of affected borrowers.
- Staff welcomes easing loan repayment conditions but urges:
  - Encourage prudent renegotiation of loan terms without lowering loan classification and provisioning standards.
  - Introduce strict criteria for acceptable loan restructuring.
  - Step up reporting requirements for affected loans.
  - Encourage banks to regularly conduct portfolio reviews and risk assessments to measure the impact of the Pandemic on their financial conditions.

### Digital payments and containment measures
- BNR announced measures to promote digital channels and mobile payments to contain virus transmission:
  - Charges on electronic money transactions will be waived for three months, effective from March 19. These include:
    - The cost of transfers between bank accounts and mobile wallets.
    - The cost of mobile money transfers.
    - Merchant fees on digital transactions.
  - Limits on individual transfers using mobile money wallets will be raised.

### Exchange rate policy and reserves
- Given heightened uncertainty and pressure on the exchange rate:
  - Maintaining exchange rate flexibility as a shock absorber and preserving an adequate international reserve cover are key.
  - Authorities agreed foreign exchange market interventions should be limited to avoiding excessive exchange rate volatility.
  - Exchange rate flexibility would support the nascent interest rate-based monetary policy framework.

### Authorities’ views and fiscal/financing response
- Authorities’ assessment:
  - The Pandemic is taking a severe toll; downside risks to growth are likely more substantial than initially envisaged.
  - Real GDP growth projections are likely to be revised downward if confinement is prolonged and recovery delayed.
  - Authorities agree with the assessment of debt sustainability based on a customized stress test approximating the impact of the Pandemic.
- Policy actions:
  - The Ministry of Finance and Economic Planning and BNR are working closely to devise measures to mitigate the impact of the Pandemic on SMEs and the financial sector.
  - Disbursement under the RCF would provide support as authorities mobilize resources from the international community.

### Access to Fund financing and capacity to repay
- RCF request and modality:
  - Authorities are requesting a disbursement under the RCF “exogenous shock” window equivalent to 50 percent of quota (SDR 80.1 million or US$ 109.4 million).
  - The authorities request this financing be made available in its entirety as budget support.
  - The disbursement would provide timely support for urgent fiscal needs and provide additional foreign exchange to avoid a sharp drop in international reserves.
  - The balance of payments difficulties necessitating the RCF request are caused primarily by a sudden exogenous shock and are expected to be resolved within the next 12 months without major policy adjustments.
- Capacity to repay and safeguards:
  - Rwanda’s capacity to repay to the Fund is adequate.
  - The total amount of outstanding credit from the Fund, once the RCF is disbursed, will amount to 130 percent of quota.
  - Total obligations to the Fund would remain below 1.5 percent of exports of goods and services, 1.9 percent of government revenue, and up to 3.4 percent of gross international reserves.
  - Given RCF financing used in its entirety for budget support, the authorities signed a framework agreement between the government and BNR on roles and responsibilities for servicing Fund obligations.
  - The authorities committed to an update of the safeguards assessment before Board approval of any subsequent arrangement; the last safeguards assessment was undertaken in 2016 and authorities have implemented all safeguards recommendations and BNR continues to publish its audited financial statements.

### Staff appraisal and policy support
- Rapid assessment:
  - Rwanda is feeling the brunt of the Coronavirus Pandemic; the short-term outlook has deteriorated quickly due to slowdown following containment and mitigation measures.
- Staff support:
  - Staff welcomes the authorities’ swift response to contain and mitigate the spread and impact of the virus.
  - Staff supports the temporary suspension of the fiscal rule to allow the fiscal deficit to increase for scaling up health care spending and targeted support to families and firms.
  - Staff supports BNR measures to provide additional liquidity support beyond existing facilities, easing of loan repayment conditions, and elimination of charges related to digital channels and mobile payments.
- Fiscal and debt sustainability:
  - Authorities remain committed to medium term fiscal and debt sustainability.
  - Authorities are seeking concessional resources from development partners to address fiscal pressures and safeguard debt sustainability.
  - A stress test approximating the impact of the Pandemic assures debt sustainability even under the significantly negative outlook.
- Final policy guidance reiterated:
  - Monetary policy should continue to be data-driven.
  - Exchange rate flexibility is key as a shock absorber.
  - Foreign exchange market interventions should be limited to avoiding excessive exchange rate volatility.

*Source: 1rwaea2020002 - 18.      Staff welcomes BNR’s steps in response to the unfolding crisis and recommends*

### 32.      Against this background, staff supports the authorities’ request for a disbursement

### Against this background, staff supports the authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR80.1million (50 percent of quota)

### Staff conclusion and rationale
- Staff supports the authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR80.1million (50 percent of quota).
- Support is based on:
  - the severity of the impact from the Pandemic,
  - the authorities’ existing and prospective policies to address this external shock,
  - the urgent balance of payments need,
  - the authorities’ policy commitments to fiscal prudence and their strong track record, which will mitigate any risks for the Fund.

### Output, prices, and growth projections (annual percentage change unless otherwise indicated)
- Real GDP:
  - 2018: 8.6
  - 2019: 8.5
  - 2020 (Act./1st Rev./Proj. mixed entries present): entries include 10.1, 8.0, 5.1, 8.0, 6.7, 8.0 (table shows multiple columns across years and revisions)
- GDP deflator:
  - entries include -0.8, 1.8, 1.2, 5.6, 6.5, 5.0, 5.4, 5.0
- CPI (period average): 1.4, 2.3, 2.4, 5.4, 6.9, 5.0, 5.4, 5.0
- CPI (end period): 1.1, 5.7, 6.7, 5.0, 5.0, 5.0, 5.0, 5.0
- Terms of trade (deterioration, -): -0.7, -1.8, -1.8, -0.1, 0.9, 0.0, -0.6, 0.0

### Fiscal position (percent of GDP and Rwandan francs where indicated)
- Total revenue and grants (percent of GDP): 24.1, 23.6, 23.6, 23.1, 21.3, 22.9, 23.3, 23.0
  - Tax revenue: 16.2, 16.6, 16.7, 16.9, 14.9, 16.5, 16.8, 17.0
  - Grants: 4.9, 4.5, 4.2, 4.1, 4.4, 4.3, 4.3, 4.1
- Expenditure (percent of GDP): 28.8, 31.9, 31.7, 29.0, 31.9, 29.2, 29.7, 27.8
  - Current: 15.3, 15.9, 15.6, 14.5, 16.1, 14.6, 14.9, 13.3
  - Capital: 11.5, 12.7, 13.2, 12.1, 13.0, 12.7, 12.9, 12.7
- Primary balance (percent of GDP): -3.5, -6.9, -6.8, -4.2, -8.9, -4.9, -5.0, -3.3
- Overall balance (percent of GDP): -4.7, -8.2, -8.1, -5.9, -10.6, -6.3, -6.5, -4.8
  - Excluding grants: -9.6, -12.7, -12.3, -10.0, -15.0, -10.6, -10.8, -8.9
- Total public debt incl. guarantees (percent of GDP): 53.1, 59.0, 58.4, 58.9, 64.5, 59.8, 66.4, 65.7
  - External public debt (percent of GDP): 41.6, 46.0, 46.2, 48.1, 48.0, 49.8, 48.7, 49.1
- PV of total public debt incl. guarantees (percent of GDP): 40.9, 44.5, 42.6, 43.1, 47.5, 42.9, 48.4, 47.5
- GDP at current market prices (Rwanda francs, billion): 8,189; 9,045; 9,121; 10,313; 10,210; 11,688; 11,476; 13,012
- Population (million): 12.1; 12.4; 12.4; 12.7; 12.7; 13.0; 13.0; 13.3

### Budgetary central government flows (selected levels and shares)
- Revenue and grants (Billions of Rwandan francs across FY17/18–FY21/22): entries include 1,820; 2,065; 2,250; 2,272; 2,139; 2,551; 2,463; 2,848; 2,848
  - Total revenue: 1,462; 1,670; 1,847; 1,869; 1,736; 2,065; 1,977; 2,342; 2,342
  - Tax revenue: 1,253; 1,419; 1,591; 1,601; 1,468; 1,828; 1,752; 2,090; 2,090
  - Grants: 359; 395; 403; 403; 403; 486; 486; 506; 506
- Total expenditure and net lending (Billions of Rwandan francs): 2,188; 2,611; 2,942; 3,065; 3,145; 3,169; 3,239; 3,516; 3,516
  - Current expenditure: 1,177; 1,343; 1,455; 1,498; 1,548; 1,626; 1,670; 1,793; 1,793
  - Capital expenditure: 850; 1,072; 1,160; 1,236; 1,266; 1,322; 1,348; 1,492; 1,492
- Overall balance (incl. grants, commitment basis) (Billions of Rwandan francs): -367; -546; -691; -792; -1,006; -618; -777; -668; -668
  - Debt-creating overall balance (excl. PKO): -371; -485; -596; -697; -911; -624; -783; -679; -679

### External sector and balance of payments (Millions of U.S. dollars)
- Current account balance (incl. official transfers):
  - 2018: -756
  - 2019: -1,068
  - 2020 (Act.): -935
  - 2020 (1st Review): -1,077
  - 2020 (Proj.): -1,728
  - 2021 (1st Review): -1,077
  - 2021 (Proj.): -1,191
  - 2022 (Proj.): -1,243
- Trade balance:
  - 2018: -915
  - 2019: -1,154
  - 2020 (Act.): -1,072
  - 2020 (1st Review): -1,202
  - 2020 (Proj.): -1,165
  - 2021 (1st Review): -1,286
  - 2021 (Proj.): -1,359
  - 2022 (Proj.): -1,479
- Exports (f.o.b.):
  - 2018: 1,126
  - 2019: 1,171
  - 2020 (Act.): 1,167
  - 2020 (1st Review): 1,298
  - 2020 (Proj.): 1,028
  - 2021 (1st Review): 1,458
  - 2021 (Proj.): 1,370
  - 2022 (Proj.): 1,645
  - Of which: coffee and tea: 159; 152; 156; 163; 140; 196; 198; 229
  - Of which: minerals: 142; 103; 98; 122; 60; 144; 115; 129
- Imports (f.o.b.):
  - 2018: 2,041
  - 2019: 2,325
  - 2020 (Act.): 2,239
  - 2020 (1st Review): 2,499
  - 2020 (Proj.): 2,193
  - 2021 (1st Review): 2,744
  - 2021 (Proj.): 2,728
  - 2022 (Proj.): 3,124
  - Of which: capital goods: 548; 678; 645; 695; 432; 796; 929; 1,113
  - Of which: Energy goods: 246; 257; 254; 277; 174; 294; 196; 238
- Services (net): -186; -187; -123; -141; -538; -94; -59; -31
  - Credit (services): 917; 992; 993; 1,031; 443; 1,223; 1,293; 1,482
  - Tourism receipts (of services credit): 375; 405; 411; 445; 82; 512; 509; 535
- Income (net): -312; -368; -325; -397; -347; -438; -404; -454
  - Of which: interest on public debt: 89; -92; -92; -100; -96; -113; -87; -86
- Current transfers (net): 657; 642; 585; 663; 322; 741; 631; 721
  - Private: 311; 320; 331; 354; 109; 376; 328; 363
  - Public: 346; 322; 254; 309; 214; 364; 303; 358
- Capital and financial account balance: 891; 1,116; 1,232; 1,286; 1,097; 1,214; 1,387; 1,458
  - Financial account: 647; 856; 972; 1,001; 813; 923; 1,097; 1,172
  - Direct investment: 284; 300; 331; 367; 186; 368; 518; 425
  - Public sector capital: 482; 527; 599; 609; 638; 542; 559; 672
  - Long-term borrowing: 550; 597; 669; 862; 890; 701; 704; 794
- Gross official reserves (Millions of U.S. dollars): 1,319; 1,367; 1,440; 1,553; 1,000; 1,654; 1,160; 1,330
  - In months of next year's imports of G&S: 4.7; 4.4; 5.4; 4.6; 2.9; 4.6; 3.0; 3.3
- Financing gap and prospective financing:
  - Financing gap entries show "............213...00" and memorandum items show financing gap (for adequate reserves) entries including 360; 385; 268 and percent of GDP entries 3.3; 3.3; 2.1
  - Prospective RCF from the IMF and prospective financing from the World Bank are reflected in tables (see Financing Sources and Table 6)

### Monetary and financial sector indicators
- Broad money (M3) year-on-year growth: 15.6; 14.3; 21.8; 15.4; 22.9; 13.2; 21.9; 11.0; 12.2; 17.4; 18.6; 13.4 (table shows multiple snapshot entries)
- Reserve money year-on-year growth: 16.1; 15.3; 21.5; 17.2; 20.2; 9.7; 22.1; 10.9; 13.9; 17.8; 18.6; 17.6
- Credit to non-government sector (percent, multiple entries): 10.8; 17.6; 12.6; 14.8; 9.1; 7.9; 11.4; 13.4
- Financial soundness indicators (selected):
  - Regulatory capital to risk-weighted assets: 20.5; 20.0; 19.5; 20.1; 20.8; 23.8; 22.4; 21.8; 22.2
  - NPLs/gross Loans: 7.7; 7.6; 6.8; 6.9; 7.2; 6.4; 6.3; 5.6; 5.3
  - Provisions/NPLs: 43.8; 46.7; 59.2; 67.4; 64.2; 68.2; 71.1; 80.2; 85.4
  - Return on average assets: 1.6; 1.1; 1.3; 1.6; 1.7; 1.9; 2.1; 1.6; 2.1
  - Net interest margin: 9.5; 8.8; 9.8; 9.7; 9.5; 9.0; 9.2; 8.8; 9.0
  - Liquid assets/total deposits: 43.7; 46.7; 49.4; 32.7; 33.5; 35.3; 35.4; 36.3; 33.7

### External financing requirements, sources, and IMF financing assumptions (Millions of U.S. dollars)
- Financing needs: 890; 1,054; 1,311; 1,387; 1,458
  - Current account deficit: 756; 935; 1,728; 1,191; 1,243
  - Net payment to the IMF: -240; 223; 645 (table entries)
  - Reserve accumulation (+=increase): 158; 120; -439; 160; 170
- Financing sources (excluding COVID-19 related changes unless specified):
  - Capital account: 245; 260; 285; 290; 286
  - Financial account: 647; 972; 813; 1,097; 1,172
- Financing from the IMF (RCF):
  - Table 6 notes: Assumes access of 50.0 percent of the quota in April 2020 as one-time disbursement (reflected as 109 in 2020 in the table)
- Financing from the World Bank: 73 shown in Table 6 projections for 2020
- Remaining financing gap entries: 0; 0; 3; 100 (table shows "Remaining financing gap 0 0 3 100")

### Indicators of capacity to repay the Fund (SDR and U.S. dollar projections)
- IMF obligations based on existing credit (Principal, in millions of SDRs, projected): 16.0; 26.0; 32.0; 32.0; 24.0; 12.0; 2.0; 0.0; 0.0; 0.0; 0.0
- Total IMF obligations based on existing and prospective credit (millions of SDRs, projected): 16.2; 26.2; 32.2; 32.2; 24.2; 20.2; 18.2; 16.2; 16.2; 16.2; 8.2
- Total IMF obligations (millions of U.S. dollars, projected): 22.3; 36.4; 44.8; 45.0; 33.9; 28.4; 25.6; 22.7; 22.7; 22.7; 11.5
- Total IMF obligations (percent of GDP, projected): 0.2; 0.3; 0.4; 0.3; 0.2; 0.2; 0.1; 0.1; 0.1; 0.1; 0.0
- IMF credit outstanding (end-of-period, in millions of SDRs, projected): 208.3; 182.2; 150.2; 118.2; 94.1; 74.1; 56.1; 40.1; 24.0; 8.0; 0.0
- IMF credit outstanding (end-of-period, in millions of U.S. dollars, projected): 288.4; 253.2; 209.4; 165.1; 132.0; 104.3; 78.9; 56.4; 33.8; 11.3; 0.0
- IMF credit outstanding (percent of GDP, projected): 2.7; 2.2; 1.6; 1.2; 0.9; 0.6; 0.4; 0.3; 0.2; 0.0; 0.0
- Memorandum items (selected):
  - Nominal GDP (Millions of U.S. dollars, projected): 10,815; 11,633; 12,717; 14,083; 15,383; 16,626; 17,976; 19,466; 21,224; 23,212; 25,384
  - Exports of goods and services (Millions of U.S. dollars, projected): 1,471; 2,663; 3,127; 3,239; 3,581; 4,021; 4,538; 5,121; 5,747; 6,443; 7,198
  - Government revenue (Millions of U.S. dollars, projected): 1,831; 2,201; 2,406; 2,668; 2,945; 3,217; 3,513; 3,842; 4,230; 4,671; 5,157
  - Gross international reserves (Millions of U.S. dollars, projected): 1,000; 1,160; 1,330; 1,445; 2,175; 2,442; 2,737; 3,071; 3,401; 3,767; 4,154
  - IMF quota (Millions of SDRs): 160.2 (constant across projections)
- Note: Tables assume access of 50.0 percent of the quota in April 2020 as one-time disbursement for RCF calculations.

*Source: Rwandan authorities and IMF staff estimates and projections (extracted from the supplied IMF staff document tables and text).*

### Annex I. Debt Sustainability Analysis Update

### Annex I. Debt Sustainability Analysis Update

### Risk rating and overall assessment
- Rwanda’s public debt is sustainable and remains at a low risk of external and overall debt distress.
- The DSA covers the central government as well as guarantees and debt held by all state-owned enterprises.
- This DSA is based on the baseline of the most recent DSA, published in July 2019, which will be updated in the next full DSA.
- Application of judgment: No change; Risk of external debt distress: Low; Overall risk of debt distress: Low.

### COVID-19 pandemic customized stress test and shocks
- The DSA introduces a customized stress test to approximate the impact of the COVID-19 Pandemic on Rwanda’s economy.
- Shocks applied in the COVID-19 Pandemic scenario (compared to the baseline in the previous DSA):
  - Real GDP growth shock: -2.6 percentage points in 2020.
  - Primary balance shock: -3.2 percentage points in 2020 (percent of GDP).
  - Exports shock: -9.7 percentage points in 2020 to reflect lower receipts from tourism and goods exports.
- Consequences of the COVID-19 scenario:
  - Produces a one-off breach to the PV of debt-to-exports ratio in 2020.
  - All other external and public debt burden indicators remain under their respective thresholds under the baseline and stress tests, except:
    - One-off breaches in external debt service indicators in 2023 when the Eurobond issued in 2013 matures.
  - One-year breaches are automatically discounted from the analysis according to the LIC-DSF guidance note.

### Key baseline external DSA indicators (selected)
- External debt (nominal) as percent of GDP:
  - 2016: 43.8; 2017: 46.4; 2018: 50.0; 2019: 51.3; 2020: 53.0; 2021: 54.3; 2022: 54.8; 2023: 55.3; 2024: 56.6; 2029: 61.8; 2039: 69.9; 2029–2039 continuation shown to 56.7 in table.
- Public and publicly guaranteed (PPG) external debt (percent of GDP):
  - 2019: 43.4; 2020: 44.6; 2021: 45.5; 2022: 45.8; 2023: 46.7; 2024: 49.6; 2029: 50.7; 2039: 44.7 (table entries shown across projection horizon).
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio (selected years): 2019: 29.6; 2020: 29.4; 2021: 29.6; 2024: 29.9; 2029: 34.6.
  - PV of PPG external debt-to-exports ratio (selected years): 2019: 138.4; 2020: 138.0; 2021: 132.9; 2024: 132.9; 2029: 106.1.
  - PPG debt service-to-exports ratio (selected years): 2019: 7.8; 2020: 9.0; 2021: 10.5; 2023: 19.3; 2029: 11.3.
  - PPG debt service-to-revenue ratio (selected years): 2019: 8.6; 2020: 10.5; 2021: 12.3; 2023: 23.6; 2029: 16.6.
  - Gross external financing need (Billion of U.S. dollars): 2019: 1.2; 2020: 0.6; 2021: 0.6; 2022: 0.9; 2023: 1.0; 2024: 1.1; 2029: 4.4.

### Key baseline public sector DSA indicators (selected)
- Public sector debt (percent of GDP):
  - 2016: 44.2; 2017: 48.9; 2018: 53.1; 2019: 55.8; 2020: 57.3; 2021: 58.2; 2022: 57.2; 2023: 56.7; 2024: 56.5; 2029: 58.4; 2039: 62.8; projections show 32.4 and 57.2 across horizon in table.
- Of which: external debt (percent of GDP) aligns with external DSA entries (e.g., 2019: 43.4).
- Identified debt-creating flows and drivers (selected):
  - Primary deficit (percent of GDP): 2019: 4.9; 2020: 5.0; 2021: 4.8; 2022: 3.6; 2023: 3.6; 2029: 2.6.
  - Revenue and grants (percent of GDP): 2019: 23.1; 2020: 22.2; 2021: 21.6; 2029: 23.4.
  - Primary (noninterest) expenditure (percent of GDP): 2019: 28.0; 2020: 27.2; 2021: 26.4; 2029: 26.6.
- Sustainability indicators (selected):
  - PV of public debt-to-GDP ratio (selected years): 2019: 42.9; 2020: 42.7; 2021: 41.6; 2029: 47.2.
  - PV of public debt-to-revenue and grants ratio (selected years): 2019: 184.3; 2020: 193.7; 2021: 197.6; 2029: 201.8.
  - Debt service-to-revenue and grants ratio (selected years): 2019: 29.3; 2020: 29.5; 2021: 17.5; 2029: 34.1.
  - Gross financing need (percent of GDP): 2019: 9.0; 2020: 10.6; 2021: 9.0; 2029: 11.8.

### Sensitivity analysis highlights (selected results from Annex Table 3)
- PV of debt-to-GDP ratio (baseline and scenarios, percent):
  - Baseline: 2019: 29.4; 2020: 29.6; 2021: 29.4; 2029: 33.0.
  - Alternative Scenario A1 (historical averages): 2019: 29.4; 2020: 30.6; 2025: 40.5; 2029: 50.8.
  - Alternative Scenario A2 [COVID-19 pandemic]: 2019: 29.4; 2020: 32.5; 2021: 31.3; 2029: 34.4.
  - Bound test B6 (one-time 30 percent nominal depreciation): 2019: 29.4; 2020: 37.4; 2029: 39.8.
- PV of debt-to-exports ratio (baseline and scenarios):
  - Baseline: 2019: 138.5; 2020: 138.1; 2021: 132.9; 2029: 126.2.
  - COVID-19 pandemic (A2): 2019: 138.6; 2020: 277.9; 2021: 138.6; 2029: 130.8 (one-off jump in 2020 noted).
  - Bound test B3 (exports): 2019: 138.5; 2020: 163.0; 2021: 191.6; 2029: 171.0.
- Debt service-to-exports ratio (baseline and COVID-19 A2):
  - Baseline: 2019: 9.0; 2020: 10.5; 2021: 12.3; 2029: 7.0.
  - COVID-19 pandemic: 2019: 9.0; 2020: 19.5; 2021: 13.3; 2029: 7.8.
- Notation: One-off breaches (e.g., large 2020 jump in PV debt-to-exports under COVID-19) are presented but treated as excluded for mechanical signaling per LIC-DSF guidance.

### Tailored tests and borrowing assumptions (methodological notes)
- The COVID-19 Pandemic scenario is the customized shocks approximating the stress event and their impact captured in the Staff Report; other scenarios are based on the baseline in the previous DSA (Country Report No. 19/211).
- All additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA.
- Default terms of marginal debt are based on baseline 10-year projections.
- The most extreme stress test is the test that yields the highest ratio in or before 2029; stress tests with one-off breaches are presented but one-off breaches are deemed away for mechanical signals.

*Source: Annex I. Debt Sustainability Analysis Update (1rwaea2020002).*

### Annex Table 4. Rwanda: Sensitivity Analysis for Key Indicators of Public Debt, 2019‒29

### Annex Table 4. Rwanda: Sensitivity Analysis for Key Indicators of Public Debt, 2019‒29

### Sensitivity analysis — Key indicator: (In percent) baseline and scenarios (2019–2029)
- Years: 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
- Baseline: 42.5, 42.9, 42.7, 41.6, 41.2, 41.0, 40.9, 41.2, 41.4, 41.8, 42.2
- A. Alternative Scenarios
  - A1. Key variables at their historical averages in 2019-2039 1/: 43, 42, 41, 40, 39, 38, 37, 37, 37, 36
  - A2. Alternative Scenario :[COVID-19 pandemic] 3/: 43, 45, 45, 43, 42, 42, 43, 44, 44, 45, 45
- B. Bound Tests
  - B1. Real GDP growth: 43, 45, 48, 47, 48, 49, 49, 50, 51, 52, 54
  - B2. Primary balance: 43, 44, 46, 45, 44, 44, 43, 43, 44, 44, 44
  - B3. Exports: 43, 44, 47, 46, 45, 45, 44, 45, 45, 45, 45
  - B4. Other flows 2/: 43, 45, 46, 45, 44, 44, 44, 44, 44, 44, 44
  - B6. One-time 30 percent nominal depreciation: 43, 48, 45, 42, 40, 38, 37, 36, 35, 35, 34
  - B6. Combination of B1-B5: 43, 42, 44, 42, 42, 42, 41, 41, 42, 42, 42
- C. Tailored Tests
  - C1. Combined contingent liabilities: 43, 47, 46, 45, 44, 44, 43, 44, 44, 44, 44
  - C2. Natural disaster: n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a.
  - C3. Commodity price: n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a.
  - C4. Market Financing: 43, 43, 43, 42, 41, 41, 41, 41, 42, 42

### PV of Debt-to-Revenue Ratio — baseline and scenarios (2019–2029)
- Baseline: 184.3, 193.7, 197.6, 189.0, 185.5, 185.0, 185.2, 186.6, 188.0, 189.7, 191.6
- A. Alternative Scenarios
  - A1. Key variables at their historical averages in 2019-2039 1/: 184, 189, 189, 179, 175, 171, 168, 167, 165, 164, 163
  - A2. Alternative Scenario :[COVID-19 pandemic] 3/: 181, 201, 198, 193, 195, 196, 200, 205, 207, 207, 207
- B. Bound Tests
  - B1. Real GDP growth: 184, 202, 218, 213, 213, 216, 220, 225, 231, 236, 241
  - B2. Primary balance: 184, 199, 213, 203, 198, 197, 196, 197, 198, 199, 200
  - B3. Exports: 184, 201, 218, 208, 203, 202, 201, 202, 202, 203, 203
  - B4. Other flows 2/: 184, 203, 214, 204, 200, 199, 198, 199, 200, 200, 201
  - B6. One-time 30 percent nominal depreciation: 184, 218, 211, 195, 182, 176, 170, 166, 162, 159, 157
  - B6. Combination of B1-B5: 184, 191, 220, 219, 318, 918, 818, 718, 818, 919, 0192
- C. Tailored Tests
  - C1. Combined contingent liabilities: 184, 211, 214, 204, 199, 197, 197, 197, 198, 199, 201
  - C2. Natural disaster: n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a.
  - C3. Commodity price: n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a.
  - C4. Market Financing: 184, 194, 198, 189, 185, 185, 185, 187, 188, 190, 192
- Public debt benchmark: 70, 70, 70, 70, 70, 70, 70, 70, 70, 70, 70

### Debt Service-to-Revenue Ratio — baseline and scenarios (2019–2029)
- Baseline: 17.5, 23.1, 32.1, 30.7, 39.5, 27.5, 26.3, 25.0, 25.3, 25.8, 26.8
- A. Alternative Scenarios
  - A1. Key variables at their historical averages in 2019-2039 1/: 18, 23, 33, 33, 32, 41, 29, 27, 26, 26, 27, 28
  - A2. Alternative Scenario :[COVID-19 pandemic] 3/: 17, 23, 34, 33, 42, 30, 29, 28, 29, 29, 29
- B. Bound Tests
  - B1. Real GDP growth: 18, 24, 35, 35, 45, 33, 32, 31, 32, 33, 34
  - B2. Primary balance: 18, 23, 34, 34, 42, 30, 28, 26, 26, 27, 28
  - B3. Exports: 18, 23, 32, 31, 40, 28, 27, 25, 26, 27, 28
  - B4. Other flows 2/: 18, 23, 32, 31, 40, 28, 27, 25, 26, 27, 28
  - B6. One-time 30 percent nominal depreciation: 18, 23, 34, 31, 43, 28, 27, 27, 25, 26, 27
  - B6. Combination of B1-B5: 18, 23, 32, 32, 40, 28, 27, 25, 26, 26, 27
- C. Tailored Tests
  - C1. Combined contingent liabilities: 18, 23, 38, 33, 34, 32, 29, 27, 26, 26, 27
  - C2. Natural disaster: n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a.
  - C3. Commodity price: n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a., n.a.
  - C4. Market Financing: 18, 23, 23, 23, 19, 28, 26, 25, 25, 26, 27

### Notes and data sources
- Sources: Country authorities; and staff estimates and projections.
- 1/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.
- 2/ Includes official and private transfers and FDI.
- 3/ COVID-19 Pandemic scenario is the customized shocks approximating the stress event and their impact captured in the Staff Report, while other scenarios are based on the baseline in the previous DSA (Country Report No. 19/211).

### Projections and key macro-fiscal figures from the Letter of Intent and staff report
- Real GDP growth projection: 10.1 percent in 2019; projected 5.1 percent in 2020 (pre-pandemic projection of 8 percent).
- Inflation: average 6.9 percent in 2020 compared to 2.4 percent in 2019.
- Fiscal revenue shortfalls: 1.3 percent of GDP in FY 2019/20 and 0.5 percent of GDP in FY 2020/21.
- Estimated total cost of emergency response plan: RWF150 billion over two years (or 0.8 percent of GDP in FY2019/20 and 0.6 percent of GDP in FY 2020/21).
- Public finances: over the next two years, pandemic-related cost estimated at 3.4 percent of GDP total, adding 2.2 and 1.5 ppts of GDP in FY 19/20 and FY 20/21 respectively to programmed debt-creating fiscal deficits (excluding Peace Keeping Operations).
- Current account and external finances:
  - Current account deficit projected to widen by 16 percent of GDP compared to 9.9 percent of GDP projected at the time of the first review of the PCI.
  - External financing gap due to the Pandemic: US$213 million.
- IMF assistance request: emergency financing under the Rapid Credit Facility (RCF) in the amount of SDR80.1 million, equivalent to 50 percent of Rwanda’s quota; request for disbursement as direct budget support to the Ministry of Finance and Economic Planning’s account at BNR.
- Central bank (BNR) policy measures:
  - Extended lending facility: RWF 50 billion available to banks for the next six months, which can borrow at policy rate.
  - Purchase of Treasury bonds through the rediscount window for the next six months.
  - Lowering the reserve requirement ratio by 100 basis points, from 5 to 4 percent, effective from April 1.
  - Temporary elimination of charges related to the use of digital channels and mobile payments (agreed with mobile network operators and banks).
  - Allowance for banks to prudently restructure outstanding loans of affected borrowers, with recommendations to preserve loan classification and provisioning standards.
- Balance of payments and reserves: absent support, reserves projected to fall below 3 months of prospective imports cover in 2020 (below the adequate level of 4‒5 months).

### Policy directions, commitments, and program considerations
- Authorities’ commitments and planned actions:
  - Increase fiscal deficit temporarily to accommodate pandemic impact, with intent to revert to the program fiscal rule once the pandemic subsides.
  - Plan direct support to affected businesses and households; FY 20/21 budget to prioritize public health and social spending.
  - Consider targeted tax relief measures for affected firms, support for SMEs, and programs such as door-to-door food distribution for vulnerable people under lockdown.
  - Maintain exchange rate flexibility as a shock absorber; limit foreign exchange market interventions to avoid excessive volatility.
  - Request IMF and development partner support to fill fiscal and reserve gaps; IMF involvement seen as catalytic to secure additional financing.
  - Commit to an update of the 2016 safeguards assessment before IMF Board approval of any subsequent arrangement to which safeguards policy applies; provide BNR audited financial statements and allow auditors to hold discussions with IMF staff.
  - Authorities plan to discuss an escape clause in the fiscal rule for emergency spending related to catastrophic events in the context of the next PCI review.

*Source: Annex Table 4 and associated Letter of Intent and staff report (content unit 1rwaea2020002).*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1rwaea2020002.pdf_