## _cr04382

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### Executive Summary
- Rwanda has "made great strides in the period since 1994," establishing "the key elements of a market economy" and restoring "macroeconomic stability."
- Key challenges: moving to "high and sustainable economic growth" despite being "landlocked, lacking significant natural resources, and supporting the highest population density in Africa."
- Transition risks: the shift "from recovery and reconstruction to sustained growth" presents "new and substantial risks."
- Recent growth: "GDP growth in 2004 may fall short of target, due to a slowdown in construction and the effects of a drought-induced electricity shortage."
- Merchandise export-to-GDP ratio: "4 percent in 2003."
- Key medium-term risks:
  - Agricultural productivity gains may not be realized.
  - Export growth may be slower than envisaged and/or external terms of trade may deteriorate.
  - The level of external grant assistance may not be adequate.

### Macroeconomic performance and outlook
- Real GDP growth and near-term risks:
  - 1999: 7.6; 2000: 6.0; 2001: 6.7; 2002: 9.4; 2003: 0.9; 2004 Prog.: 6.0.
  - Failed rains in 2003 led to decline in agricultural output (accounts for 40 percent of value added).
  - Staff note: reported 2003 growth figure is 1.5 percentage points below authorities’ initial estimate.
- Inflation, monetary aggregates, and reserves:
  - Consumer prices (period average): 1999: -2.4; 2000: 3.9; 2001: 3.4; 2002: 2.0; 2003: 7.4; 2004 Prog.: 6.9.
  - Broad money (end-2003 stock): increased by 15.2 percent; broad money growth brought down to 10.4 percent by end-June 2004.
  - Reserve/import cover: fell from 6.3 months at end-2002 to 5.2 months at end-2003; international reserves rose to US$ 218.8 million (5.4 months of imports) at end-June 2004.
  - Inflation peaked at 11.2 percent in February 2004, moderated during March–June 2004.
- External current account:
  - External current account deficit before grants increased by 3 percentage points of GDP to 19.2 percent of GDP in 2003.
  - First half 2004: coffee export volumes increased substantially; cassiterite exports rose due to tin price jump; merchandise imports through May 2004 lower than projected.

### Fiscal developments and public finances
- Revenue and deficits:
  - Revenue-to-GDP ratio rose to 13.5 in 2003 and is on-track to maintain that level in 2004.
  - Domestic revenue-to-monetized sector GDP ratio: estimated 21.2 percent in 2001 to 25.4 percent in 2003.
  - Overall fiscal deficit after grants: amounted to 2.5 percent of GDP in 2003; programmed to decline to 2.2 percent of GDP in 2004.
  - Government spending focus: social programs and capital expenditure.
- Historical fiscal indicators:
  - Government revenue fell from "about 13 percent of GDP in 1992" to "below 4 percent in 1994" and stood at "just 12.2 percent of GDP in 2002."
  - Current spending averaged "about 12 1/2 percent of GDP during 1995–2000," then rose to "15 percent in 2002."
- Defense and priority spending (recurrent, percent of GDP):
  - Defense: 2001 3.3; 2002 2.9; 2003 2.7; 2004 Prog. 2.5.
  - Priority: 2001 5.3; 2002 6.1; 2003 6.5; 2004 Prog. 8.2.
- Budget execution and financing:
  - 2003 execution: wage bill and several structural elements in line with targets; overruns on election spending and end-year purchases.
  - External borrowing (equivalent to 4 percent of GDP in 2003) held below HIPC decision point projections; domestic bank financing limited.
- Policy guidance:
  - Staff urged improving tax efficiency, avoiding new tax exemptions, strengthening revenue authority, and aligning fiscal strategy with realistic domestic revenue and external grant projections.
  - Absent substantial long-term increase in external program grants, expanded programs in health, education, water and energy "would widen the structural deficit" and be unsustainable.

### External debt, debt sustainability, and financing
- Historical and recent debt metrics:
  - External indebtedness increased by "US$273 million" during 1995–2002.
  - NPV of external debt: "US$ 633 million percent in 1995" rising to "US$711 million (equivalent to 236 percent of exports) in 2001" prior to HIPC relief.
  - Preliminary HIPC methodology estimate: NPV of debt-to-exports ratio rose to 315 percent at end-2003 (post-enhanced HIPC).
- Staff projections and prudence:
  - Staff recommended maintaining "a ceiling of 150 percent for the NPV of debt-to-exports ratio over the medium- to long-term."
  - Staff projection: NPV of debt-to-exports ratio could rise to 363 percent in 2006 under modest increase in external grant financing before topping up.
  - Staff warned sustained borrowing above US$100 million per year would entail substantial long-term risks.
  - Debt-service implications: given ten-year grace period on new external borrowing, debt-service ratio would not exceed 10 percent over the medium term in some projections; baseline scenarios show debt service-to-exports ratio climbing above 10 percent after 2020 without additional measures.

### Money, banking, and financial sector reforms and risks
- Banking sector health:
  - By end-2003 nonperforming loans were "equivalent to 17 percent of total assets (37 percent of gross loans), only half of which had been provisioned."
  - Share of nonperforming loans in gross lending: 35.6 percent at end-March 2004.
- Supervisory and regulatory actions:
  - New central bank law adopted in "1997."
  - Weekly foreign exchange auctions introduced in "2001."
  - Full audits of three commercial banks and first external audits of NBR in "2002."
  - Regulatory changes end-2003: solvency ratio increased from 8 to 10 percent; clarifications on credit concentration and asset quality.
  - By end-June 2004, NBR reached agreements with five commercial banks on action plans to achieve full compliance by end-2004; provisional agreement with sixth bank in August 2004.
- Ownership and privatization:
  - Sale of majority shares in BCR and BACAR to foreign investors agreed end-July 2004; sale of BCR and BACAR in "2004."
  - Planned recapitalization of Rwanda Development Bank (BRD).
- Monetary structure concerns:
  - Monetary overhang developed in 2003 was largely eliminated by end-June 2004.
  - Unexplained shift in the structure of base money and compression in bank reserves reduced the money multiplier and raised concerns about monetary policy effectiveness.
  - Share of currency in M2 rose by 3 percentage points to 23 percent; share of foreign currency deposits increased by 3½ percentage points to 28 percent over the past year.
  - Bank reserves at end-June 2004 fell below statutory requirement and to a very low level; reserves fell substantially short of 8 percent of deposit base for three banks.
- Staff recommendations:
  - Bring banks into compliance with prudential regulations; enforce regulatory and supervisory framework; avoid exemptions for BRD; bring UBPR into compliance with COPEC regulations; strengthen regulatory framework for mortgage bank (CHR) and Poste du Rwanda.

### Structural and policy priorities
- Core challenges: achieving "high and sustained GDP growth"; assuring "fiscal and external sustainability"; and reducing "poverty."
- Policy priorities highlighted:
  - Improve economic productivity and generate employment.
  - Strengthen export performance and diversify the export base.
  - Strengthen economic governance and institutions.
  - Monitor and address vulnerabilities in monetary structure and bank reserves.
  - Continue privatization of commercial public enterprises (Pfunda tea estate completed; Rwandatel, Rwandex, Prime Holdings, and Prime hotel company slated for rapid privatization).
  - Civil service reforms nearing implementation; land reform legislation assigning transferable title under parliamentary review.
  - Statistical improvements: revised CPI from January 2004; improved national accounts benchmarking (2001 increased by about 7 percent vs previous estimates).

### Medium-term outlook, scenarios, and investment requirements
- Long-term objective: middle-income status by 2020 (GDP target US$900 per capita by 2020).
- Baseline medium-term scenario (financing-constrained):
  - Target real GDP growth: 6 percent (medium-term).
  - Domestic fiscal deficit decline: targeted 8 percent in 2004 to 3 percent in 2007.
  - Baseline projections (selected, in percent of GDP or percent):
    - GDP growth (percent): 2004 6.0; 2005 6.0; 2006 6.0; 2007 5.8.
    - Investment: 2004 21.3; 2005 22.3; 2006 22.7; 2007 23.2.
      - Government: 2004 8.7; 2005 9.5; 2006 9.7; 2007 10.0.
      - Private: 2004 12.6; 2005 12.8; 2006 13.0; 2007 13.2.
    - Domestic Saving: 2004 -0.1; 2005 2.5; 2006 3.6; 2007 5.2.
    - Current Account deficit/GDP: 2004 -21.4; 2005 -19.8; 2006 -19.1; 2007 -18.0.
- PRSC/AfDB program scenario:
  - Preliminary: government spending could increase by 2 percentage points of GDP (half capital); higher social outlays on health, education, water.
  - Likely limited short-term impact on targeted real GDP rates; external borrowing could increase relative to base scenario given limited firm grant commitments.
- Medium- to long-term scenarios (2020 targets):
  - Target GDP per capita US$900 scenario (selected):
    - GDP per capita (US$): 2005 207; 2006 221; 2007 237; 2010 301; 2015 487; 2020 901.
    - Grants (US$ million): 2005 177; 2006 168; 2007 180; 2010 180; 2015 180; 2020 180.
    - External public borrowing requirement (US$ million): 2005 107; 2006 91; 2007 111; 2010 249; 2015 637; 2020 1,755.
  - Target GDP per capita US$630 scenario (selected):
    - GDP per capita (US$): 2005 207; 2006 221; 2007 236; 2010 292; 2015 424; 2020 630.
    - External public borrowing requirement (US$ million): 2005 107; 2006 91; 2007 112; 2010 175; 2015 245; 2020 315.
  - "150 Percent" debt-ratio-bound scenario (selected):
    - GDP per capita (US$): 2005 207; 2006 219; 2007 235; 2010 290; 2015 410; 2020 587.
    - Grants (US$ million): 177, 168, 180, 180, 180, 180.
    - Sustainability indicators: domestic revenue (percent of GDP) 13.7 (2005), 13.7 (2006), 13.7 (2007), 13.8 (2010), 15.1 (2015), 16.2 (2020).

### Governance, statistical capacity, and technical assistance
- Public financial management reforms:
  - Auditor General office strengthened; AG report issued March 2004; new Auditor General’s Act under parliamentary commission consideration.
  - New chart of accounts; internal audit at Ministry of Finance; SIBET 2 computerized accounting system targeted by end-2004.
  - New organic budget law approved August 2004; supporting financial instructions in preparation.
  - New tax law drafted; new tax and customs legislation and revised investment code submitted to parliament.
  - Large taxpayers unit created in RRA during first part of 2004.
- Statistical system weaknesses and steps:
  - National accounts and price statistics improved (new benchmarking GDP estimates 2001; revised CPI January 2004 covering 438 goods).
  - Balance of payments and trade data inconsistencies between RRA and NBR; efforts to better record trade and external project financing.
  - Fund technical assistance ongoing through AFRITAC East, MFD, FAD, STA for revenue administration, monetary policy, banking supervision, and statistics.
- Technical assistance and relations:
  - IMF long-term technical assistance to central bank: monetary policy analysis, banking supervision, internal audit; assistance on securities markets.
  - DFID supporting Institut National des Statistiques de Rwanda; East AFRITAC constructing short-term formal sector indicators (monthly PPI for manufacturing).
  - World Bank engagement: IDA credits/grants, PRSC, Institutional Reform Credit (IRC), sector projects in infrastructure, agriculture, social sectors, and private-sector development.

### Staff appraisal, Executive Board assessment, and policy recommendations
- Staff appraisal:
  - Rwanda is nearing a turning point with market elements and macro stability established; window exists to improve productivity, employment, and exports, but timing and magnitude of growth uncertain.
- Core staff and Board recommendations:
  - Strengthen implementation of economic policies.
  - Shift to grant-based financing of growth strategy until growth is firmer and external debt indicators improve.
  - Limit new external public borrowing and persuade partners to provide substantially increased grant assistance.
  - Retain objective of limiting NPV of debt-to-exports ratio to 150 percent over medium to long term.
  - Bring banks into compliance with prudential regulations to support monetary policy effectiveness and financial stability.
  - Improve tax efficiency, avoid new tax exemptions, and strengthen the revenue authority.
  - Ensure fiscal spending increases are effectively sterilized to maintain inflation objectives.
  - Urge prompt implementation of agricultural and export promotion strategies and prioritize budgetary operations with contingencies.

### Key statistics and selected table highlights (preserved exactly as in source)
- Merchandise export-to-GDP ratio: "4 percent in 2003."
- Population (2003, est.): "8.4 million"; Percent urban population: "6%".
- Selected human development indicators:
  - Agriculture as percent of GDP: "41%".
  - Total fertility rate: "5.7 children per woman".
  - Infant mortality rate (IMR): "118 per 1000 live births".
  - Under five mortality rate (U5MR): "203 per 1000 live births".
  - Maternal mortality rate (MMR): "1,400 per 100,000 live births".
  - HIV prevalence: "11.2%".
  - Primary school gross enrollment ratio: "106".
  - Primary school completion rate: "74%".
  - Access to safe water: "41%".
  - Measles immunization: "75%".
  - First antenatal visit: "90%".
- Table 1 selected series (output and prices, external debt metrics, reserves):
  - Real GDP growth series includes: 6.7, 7.3, 9.4, 6.1, 3.2, 0.9, 6.0, 6.0, 6.0, 6.0, 5.8 (as presented).
  - NPV of external debt-to-exports (selected): 236.2, 190.3, 287.2, 203.5, 222.2, 315.2, 242.1, 354.5, 365.8, 363.2, 359.5.
  - Gross reserves (US$ million, selected): 212.1, 223.6, 243.6, 236.6, 299.1, 214.2, 282.5, 208.6, 242.1, 265.2, 300.3.
- Table 2 selected fiscal entries (Rwanda francs, exact series preserved in source tables).
- Appendix I — Relations with the Fund (as of July 31, 2004):
  - Joined: 09/30/1963; Quota: 80.10 SDR million; PRGF arrangements outstanding: 61.79 SDR million.
  - PRGF approval date: 08/12/2002; Expiration date: 08/11/2005.
  - Projected Fund obligations (SDR million): 2004 Total: 2.53; 2005 Total: 6.95; 2006 Total: 10.72; 2007 Total: 12.56; 2008 Total: 11.48.
- Public Information Notice (PIN No. 04/129) summary date: November 16, 2004; Article IV consultation concluded October 6, 2004.

*Source: _cr04382 - Executive Summary and IMF staff report excerpts.*

### Executive Summary ......................................................................................................

### Executive Summary

### Key achievements and context
- Rwanda has "made great strides in the period since 1994," establishing "the key elements of a market economy" and restoring "macroeconomic stability."
- The country faces the challenge of moving to "high and sustainable economic growth" given that it is "landlocked, lacking significant natural resources, and supporting the highest population density in Africa."
- The transition "from recovery and reconstruction to sustained growth" presents "new and substantial risks."

### Recent macroeconomic performance and outlook
- Real GDP growth performance has been "erratic" in recent years; "GDP growth in 2004 may fall short of target, due to a slowdown in construction and the effects of a drought-induced electricity shortage."
- Monetary conditions:
  - "The monetary overhang that developed during 2003 was largely eliminated by end-June 2004."
  - There was an "unexplained shift in the structure of base money, and compression in bank reserves," creating concerns about monetary stability and the effectiveness of central bank policy instruments.
- Banking sector: "The recent sale of government shares in two banks should help to strengthen the commercial banking sector."
- External sector: "Rwanda’s export base remains highly concentrated and vulnerable to climatic and international price shocks."
  - Merchandise export-to-GDP ratio was "4 percent in 2003."

### Key risks over the medium term
- Agricultural productivity gains may not be realized.
- Export growth may be slower than envisaged and/or external terms of trade may deteriorate.
- The level of external grant assistance may not be adequate.

### Fiscal outlook and public finances
- The outlook for expanding the domestic revenue base is "uncertain."
- Expansion of government programs in "health, education, water and energy, would widen the structural deficit over the medium-term."
- "Absent a long-term increase in external program grants, such deficits would not be sustainable."
- Historical fiscal indicators:
  - Government revenue fell from "about 13 percent of GDP in 1992" to "below 4 percent in 1994" and stood at "just 12.2 percent of GDP in 2002."
  - Current spending averaged "about 12 1/2 percent of GDP during 1995–2000," then rose to "15 percent in 2002."
  - Imports were "about 25 percent of GDP" while exports covered "only a fraction of the import bill."

### External debt and sustainability
- External indebtedness increased by "US$273 million" during 1995–2002, contributing to deterioration in external debt sustainability.
- Historical NPV of external debt:
  - "US$ 633 million percent in 1995" rising to "US$711 million (equivalent to 236 percent of exports) in 2001" prior to HIPC relief.
  - Rwanda reached decision point under the HIPC Initiative in December 2000, which would bring the debt ratio for end-1999 to "150 percent"; by end-2000 the debt ratio had risen to "174 percent."
- Given export concentration and vulnerability, maintaining "a ceiling of 150 percent for the NPV of debt-to-exports ratio over the medium- to long-term would be prudent."

### Money, banking, and financial sector issues
- Bank asset quality remained weak: by end-2003 nonperforming loans were "equivalent to 17 percent of total assets (37 percent of gross loans), only half of which had been provisioned."
- Structural reforms and institutional progress in the financial sector:
  - New central bank law adopted in "1997."
  - Introduction of weekly foreign exchange auctions in "2001."
  - Full audits of three commercial banks in "2002."
  - First external audits of the NBR in "2002."
  - Privatization steps: "Sale of BCR, BACAR" in "2004."

### Structural and policy priorities (summary of discussions)
- Macroeconomic challenges discussed: achieving "high and sustained GDP growth"; assuring "fiscal and external sustainability"; and reducing "poverty."
- Policy priorities highlighted:
  - Improve economic productivity and generate employment.
  - Strengthen export performance and diversify the export base.
  - Strengthen economic governance and institutions.
  - Monitor and address vulnerabilities in monetary structure and bank reserves to safeguard monetary policy effectiveness.
  - Ensure fiscal strategy is aligned with realistic projections of domestic revenue and external grant flows to avoid unsustainable structural deficits.

### Social and political developments with economic implications
- Political progress:
  - New constitution adopted by popular referendum in "May 2003"; presidential and legislative elections in "August–October 2003."
- Social programs and justice processes:
  - Demobilization reached "55 percent of its target by end-2003."
  - GACACA process introduced on a trial basis during "2003"; "about 30,000 out of 110,000 detainees were released during January–February 2004," with completion of hearings planned for "2004í05."
- Human development and social indicators (Rwanda at a Glance):
  - Population (2003, est.): "8.4 million"
  - Percent urban population: "6%"
  - Agriculture as a percent of GDP: "41%"
  - Total fertility rate: "5.7 children per woman"
  - Infant mortality rate (IMR): "118 per 1000 live births"
  - Under five mortality rate (U5MR): "203 per 1000 live births"
  - Maternal mortality rate (MMR): "1,400 per 100,000 live births"
  - HIV prevalence: "11.2%"
  - Primary school gross enrollment ratio: "106"
  - Primary school completion rate: "74%"
  - Access to safe water: "41%"
  - Measles immunization: "75%"
  - First antenatal visit: "90%"

*Source: _cr04382 - Executive Summary (IMF).*

### 13.     As the implementation of Rwanda’s growth strategy lagged, reflecting

### _cr04382 - 13.     As the implementation of Rwanda’s growth strategy lagged, reflecting

### Economic performance and real-sector vulnerabilities
- Failed rains in 2003 led to a decline in agricultural output, which accounts for 40 percent of value added, and limited overall real GDP growth for the year to about 0.9 percent.
- There is a risk that real GDP growth may also fall short of target in 2004.
- Agricultural output in 2004: while growth in agricultural output may reach 6 percent, construction activity is slowing and manufacturing activity is contracting (reflecting a drought-related electricity shortage).
- The Fund to Assist Survivors of the Genocide (FARG) provides limited support to about 60 percent of victims, including basic housing, secondary school fees, and vocational training.
- Staff evaluation: the reported 2003 growth figure is 1.5 percentage points below the authorities’ initial estimate, reflecting lower real growth in some agricultural components than the authorities’ estimate.

### Fiscal developments and structural imbalance
- Revenue-to-GDP ratio: rose to 13.5 in 2003 and is on-track to maintain that level in 2004, reflecting income tax reforms in 2003 (including taxation of in-kind benefits).
- Domestic revenue-to-monetized sector GDP ratio: estimated to have increased from 21.2 percent in 2001 to 25.4 percent in 2003.
- Government spending focus: largely on social programs and capital expenditure.
- Budget execution 2003: wage bill and several key structural elements in line with targets; overruns on election spending and end-year purchases of goods and services.
- 2004 budget: restrains growth in recurrent outlays while accommodating external grant-financed increases for social initiatives; first-half 2004 data indicate spending is on track.
- External borrowing (equivalent to 4 percent of GDP in 2003) held below level projected in HIPC decision point document; domestic bank financing was limited.
- Text Table 1 (recurrent, percent of GDP) – Defense and Priority Spending:
  - Defense: 2001 3.3; 2002 2.9; 2003 2.7; 2004 Prog. 2.5
  - Priority: 2001 5.3; 2002 6.1; 2003 6.5; 2004 Prog. 8.2

### Monetary developments and inflation
- Broad money: end-2003 stock of broad money increased by 15.2 percent; broad money growth brought down to 10.4 percent by end-June 2004.
- Drivers of 2003 monetary expansion: larger-than-programmed net credit to government, increased bank lending to public enterprises, and new commercial bank lending to finance a hotel project.
- Central bank policy: raised discount window rates by 150 basis points during May–August 2003; augmented government securities sales; significantly increased foreign exchange sales at auction toward end-2003.
- Interest rates: significant increase following central bank actions.
- Reserve implications: import cover of official reserves fell from 6.3 months at end-2002 to 5.2 months at end-2003 (delayed EU and World Bank disbursements equivalent to one month of import cover).
- International reserves: rose to US$ 218.8 million (5.4 months of imports) at end-June 2004.
- Exchange rate and inflation: depreciation of the Rwanda franc in 2003; inflation peaked at 11.2 percent in February 2004, moderated modestly during March–June 2004.

### Banking sector and financial governance
- Central bank supervisory actions in 2003: on-site audits of three commercial banks, establishment of a microfinance sector supervision department, hiring of additional supervisors.
- Regulatory changes at end-2003: increase in solvency ratio from 8 to 10 percent; clarifications on credit concentration and asset quality.
- Microfinance: UBPR recapitalized in 2003 (financed by the World Bank) and doubled its lending portfolio.
- Compliance plans: by end-June 2004, NBR reached agreements with five commercial banks on action plans to achieve full compliance with bank regulations by end-2004; provisional agreement with sixth bank in August 2004.
- Ownership changes: at end-July 2004, agreements reached for sale of majority shares in the BCR and the BACAR to foreign investors.
- Central bank action on dormant accounts: public notices for closure of government dormant accounts initiated, process to continue through 2004.

### External sector, exports and debt
- External current account: deficit before grants increased by 3 percentage points of GDP to 19.2 percent of GDP in 2003.
- Terms of trade and exports 2003: moderate improvement as coffee and tea prices rose, but offset by a drop in coltan and coffee export volumes.
- First half 2004 developments: coffee export volumes increased substantially; jump in world market prices for tin led to significant increase in cassiterite exports; merchandise imports through May 2004 lower than projected.
- External debt and DSA: NPV of debt-to-exports ratio rose to about 315 percent at end-2003 after enhanced HIPC Initiative relief (preliminary estimates).
- Movement in debt-service: given ten-year grace period on new external borrowing, the debt-service ratio would not exceed 10 percent over the medium term.
- Footnote context: topping up to bring the NPV of debt-to-exports ratio to 150 percent at end-2003 would reduce the NPV ratio from 363 percent to 224 percent at end-2006.

### Governance and public financial management reforms
- Auditor General (AG): office further strengthened; audited 2002 accounts of most public entities; AG report issued to parliament in March 2004; new Auditor General’s Act under parliamentary commission consideration.
- Public financial management: new chart of accounts developed; internal audit department established at the Ministry of Finance; strengthened computerized accounting system (SIBET 2) targeted for introduction by end-2004.
- Budget law and supporting instructions: new organic budget law approved in August 2004; financial instructions supporting new law substantially progressed; cabinet review of core instructions targeted for end-September 2004.
- Tax and customs legislation: new tax law drafted with Fund staff assistance; new tax and customs legislation and revised investment code submitted to parliament.
- Tax administration: creation of a large taxpayers unit in the RRA during first part of 2004.

### Medium-term outlook and scenarios
- Long-term objective: attainment of middle-income status by 2020 (corresponds to a GDP target of US$900 per capita by 2020).
- Baseline medium-term scenario (reflecting financing constraints):
  - Target real GDP growth: 6 percent (medium-term, led by agricultural productivity improvements).
  - Fiscal consolidation: domestic fiscal deficit decline from a targeted 8 percent in 2004 to 3 percent in 2007.
  - Text Table 2 (in percent of GDP, unless otherwise stated) – Baseline Scenario projections:
    - GDP (growth rate, percent): 2004 6.0; 2005 6.0; 2006 6.0; 2007 5.8
    - Investment: 2004 21.3; 2005 22.3; 2006 22.7; 2007 23.2
      - Government: 2004 8.7; 2005 9.5; 2006 9.7; 2007 10.0
      - Private: 2004 12.6; 2005 12.8; 2006 13.0; 2007 13.2
    - Domestic Saving: 2004 -0.1; 2005 2.5; 2006 3.6; 2007 5.2
    - Current Account deficit/GDP: 2004 -21.4; 2005 -19.8; 2006 -19.1; 2007 -18.0
- PRSC/AfDB program scenario:
  - Preliminary discussions suggest government spending could increase by 2 percentage points of GDP (half of which would be capital), with higher social outlays on health, education, and water.
  - Likely limited short-term impact on targeted real GDP rates; external borrowing could increase relative to base scenario due to limited firm grant commitments.

### Debt sustainability and financing needs
- Staff projection: even under optimistic export growth assumptions, the external debt ratio would rise above the reference range over the next few years.
- Specific projection: assuming a modest increase in external grant financing, the NPV of debt-to-exports ratio on a post-enhanced HIPC Initiative basis would rise to 363 percent in 2006 before topping up.
- Long-term goal financing: achieving per capita income levels of US$630 to US$900 by 2020 would require substantially increased external grant assistance; financing these investment needs by external borrowing would lead to unsustainably high NPV of debt-to-exports ratios.

### Key medium-term risks
- Three major risks over the medium-term:
  - (i) Gains in agricultural productivity will be more modest than envisaged.
  - (ii) Export growth will be slower than targeted, and/or the external terms of trade will deteriorate.
  - (iii) The level of external grant assistance will not increase substantially.
- Implications:
  - Setbacks in agricultural growth could directly and significantly increase poverty and be destabilizing, given high population density.
  - Poor agricultural performance could generate pressure to expand the rural works program, which without a comprehensive framework might function merely as an income transfer.
  - Weak export performance or shortfalls in external grants could undermine external debt sustainability or require spending reductions/additional borrowing.

### Policy discussions and priorities
- Core challenges highlighted in the 2004 Article IV discussions:
  - Realizing productivity improvements to drive sustained GDP growth.
  - Assuring external and fiscal sustainability.
  - Reducing poverty.
- Policy actions addressed during discussions included:
  - Introduction of strengthened economic legislation.
  - Civil service and land tenure reforms.
  - Strengthening financial intermediation and banking sector soundness.
  - Continued privatization of commercial public enterprises.
- Growth strategy implementation concerns:
  - Authorities identified three key foci: (i) the institutional environment; (ii) basic infrastructure; and (iii) social investment.
  - Staff concerns: continuing human resource constraints likely to delay implementation; significant uncertainties about achievable productivity improvements and timing.
  - Sectoral notes: ITC and tourism viewed by authorities as comparative advantages, but evidence of limited operational development and lack of projected scale/timeframe for SME development.

*Source: IMF staff report content as provided in the supplied document excerpt.*

### 31.     The Rwandan authorities recognized that the sustainability of their growth

### The Rwandan authorities recognized that the sustainability of their growth strategy would, even in the best of circumstances, hinge critically on reducing external imbalances over the medium term

### Export strategy and external imbalances
- Authorities: cabinet approved a revised export promotion strategy in August 2004; an action plan is being finalized; an inter-ministerial group is coordinating implementation and monitoring.
- Supporting measures cited by authorities:
  - establishment of an EPZ.
  - entry into the East African Community (EAC) and the Southern African Development Community (SADC).
  - discussions to establish a direct railway link to Rwanda.
  - a project to use methane gas trapped under Lake Kivu for electricity generation to limit growth of energy imports.
  - initiation of a diagnostic trade integration study for Rwanda under the World Bank’s Integrated Framework scheduled during the fourth quarter of 2004.
- Staff concerns:
  - Rwanda’s export base is small relative to GDP; export growth must be both rapid and sustained to bring the NPV of external debt down to a prudent level.
  - Delays in improving export performance and continuing human resource constraints are a cause for concern.
  - Coffee and tin exports are above the level projected for 2004; tea and nontraditional exports remain weak.
  - Staff urged strengthened cooperation with the international community on implementing the export strategy and on strengthening export performance more broadly.
  - Peace and expanded commerce in the Great Lakes region, given proximity and resource base of the eastern DRC, would be critical to Rwanda’s external strategy.

### External debt sustainability
- Preliminary HIPC methodology estimate: NPV of debt-to-exports ratio rose to 315 percent at end-2003.
- Authorities’ view: confident export growth will improve; under realistic borrowing projections the debt-service ratio would not exceed 10 percent during the next decade.
- Staff warnings:
  - Sustained borrowing above US$100 million per year over the medium-term would entail substantial long-term risks given limited export diversification and vulnerability to exogenous shocks.
  - Productivity of investments financed with borrowing may turn out lower than currently projected.
  - External viability requires a shift to grant financing rather than borrowing until growth is firmer and NPV debt-to-exports ratio has improved.
  - Staff urged retaining the objective of limiting the NPV of debt-to-exports ratio to 150 percent over the medium to long term and to persuade external partners to provide additional grants to substantially finance planned expansion in government programs.
- Debt sustainability update (staff note):
  - In a baseline scenario, without additional topping up at the HIPC Initiative's completion point, the NPV of debt-to-exports ratio would only slowly decline to 229 percent by 2024.
  - Debt service-to-exports ratio would climb above 10 percent after 2020.
  - Several stress tests show adverse shocks to growth and export performance would significantly deteriorate external debt sustainability.

### Public finances
- Revenue and tax policy:
  - After tax reforms in 2002–03, revenue-to-GDP ratio appears to have plateaued at about 13.5 percent.
  - No new tax measures under consideration; staff emphasized improving tax efficiency via reform of tax, customs, and investment code legislation and policies supporting a shift from informal to formal economy.
  - Authorities urged to avoid new tax exemptions and to strengthen the revenue authority.
- Government spending and deficits:
  - Substantial spending increases under consideration for health, education, energy, water, roads, transfers to local government, and possibly EPZ development.
  - Demobilization delays to 2005 and beyond considered; domestic fiscal deficit rose from 4.2 percent of GDP in 2002 to a targeted 7.8 percent in 2004 and could remain elevated.
  - Staff noted elevated deficit would mark policy shift from progressive reduction targeted under the PRGF to reliance on external grant and loan resources for budget financing.
  - Authorities viewed scaled-up operations as generating benefits that substantially exceed costs.
- External borrowing plans and staff advice:
  - Authorities viewed increase in external indebtedness from US$92 million in 2004 to US$107 million in 2005 as viable.
  - Staff advised this level substantially exceeds that envisaged in the HIPC decision point document and, given uncertainties, would not be prudent.
  - Staff urged identifying additional grant resources and limiting new external public borrowing until export and productivity potential is demonstrated.
- 2005 budget outlook:
  - Basic elements not fixed; authorities recognized appropriateness of PRGF indicative fiscal balance.
  - Revenue outlook not encouraging: electricity crisis impact on corporate profits and softening banking sector profitability expected to reduce direct tax collections in 2005.
  - Entry into EAC and possibly SADC could modestly reduce tax revenue (fiscal impact not yet estimated).

### Monetary and exchange rate policies
- Monetary developments:
  - Monetary overhang developed in 2003 largely eliminated by end-June 2004.
  - Explanatory factors: limited net credit extension to government (non-demobilization program grants exceeded projections); increased central bank foreign exchange sales and money market interventions to meet reserve money target.
  - Changes in monetary aggregates:
    - share of currency in M2 rose by 3 percentage points to 23 percent over the past year.
    - share of foreign currency denominated deposits increased by 3½ percentage points to 28 percent over the same period.
  - Concerns: increased currency share may indicate diminished banking system role in financial intermediation; increase in foreign currency deposits may weaken central bank’s ability to control monetary aggregates.
- Bank reserves and prudential regulation:
  - Bank reserves at end-June 2004 did not meet statutory requirement and had fallen to a very low level.
  - Narrowing bank reserves could make it difficult to sterilize government spending increases; health of some banks limited interbank market operation and participation in securities and foreign exchange auctions.
  - Staff urged bringing banks into compliance with prudential regulations; authorities urged to reach agreement with all commercial banks on action plans to ensure compliance.
  - Central bank had reached agreements with five out of six commercial banks on action plans to bring them into full compliance by end-2004; reserves fell substantially short of 8 percent of the deposit base for three banks.
- Inflation:
  - Inflation remained above targeted range since final quarter of 2002; authorities pointed to food price increases linked to poor weather.
  - Recent moderation in food prices noted; authorities reaffirmed commitment to prompt reduction of inflation.
  - Staff noted non-food price increases moderated recently, but delayed feed-through of 2003 depreciation and lagged utility tariff and energy price adjustments could put upward pressure on inflation.
  - Staff stressed that substantial fiscal spending increases will need to be effectively sterilized to achieve inflation objectives.
- Exchange rate:
  - Staff concerned overly tight restrictions on bidding process for central bank foreign exchange auctions could limit exchange rate adjustment speed.
  - Authorities modified out-of-market limits on auction bids to increase exchange rate flexibility.
  - Note: Rwanda’s foreign exchange rate is market determined with NBR intervening occasionally; weekly foreign exchange auctions for banks introduced January 2001.

### Commercial banking
- Sector changes and fragility:
  - Sale of BCR and BACAR to foreign investors expected to improve health and competitiveness.
  - Planned recapitalization of Rwanda Development Bank (BRD) could strengthen financial intermediation.
  - Sector remains fragile: share of nonperforming loans in gross lending 35.6 percent at end-March 2004, higher than end-2002 level.
  - Risk concentration limits regularly breached; few banks met new capital regulations.
  - One bank consistently failed to comply with many banking regulations for an extended period.
- Staff recommendations:
  - Strict enforcement of regulatory and supervisory framework emphasized.
  - BRD should not be exempted from regulatory and tax obligations applying to other financial institutions.
  - Promptly bring UBPR into compliance with new regulation on credit and saving cooperatives (COPECs).
  - Strengthen regulatory framework for a mortgage bank (CHR) and the Poste du Rwanda.
  - MFD to provide technical assistance to assess the financial position of a bank and propose remedial actions (in response to authorities’ request).

### Structural issues
- Privatization and sector reforms:
  - Sale of the Pfunda tea estate completed; prompt action envisaged to complete privatization of the tea sector as in the PRSP and export promotion strategy.
  - Government shares in Rwandatel (telecommunications), Rwandex (coffee exporter), and Prime Holdings (hotel holding company) to be privatized as rapidly as feasible.
- Civil service and land reform:
  - Civil service reforms, including substantial reduction in force outside teachers and health workers, are nearing implementation.
  - Some development partners have signaled misgivings about accelerated reform pace; authorities view reforms as critical to decentralization and are confident of success.
  - Land reform legislation assigning transferable title is being reviewed by parliament.

### Statistical issues and technical assistance
- Statistical improvements:
  - Steps welcomed to improve national accounts, price, and balance of payments statistics.
  - Revised consumer price index introduced beginning January 2004 to improve inflation estimate reliability.
  - Continued efforts to improve national accounts statistical basis, including improved frame for agricultural data.
  - Discussions focused on reconciling inconsistencies between export data collected by RRA and NBR and on more fully recording trade and comprehensively capturing external project financing.
  - Staff recommended continued strengthening of statistics in the context of the GDDS, with Fund technical assistance including through East AFRITAC.
- Technical assistance contributions acknowledged:
  - Fund staff provided support in strengthening revenue administration, internal accounting and auditing at the Ministry of Finance, drafting of organic budget law, financial instructions, and revised tax, customs and investment codes.
  - Long-term Fund advisors supported monetary policy and internal accounting at the central bank.
  - Authorities productively used technical assistance resources.

### Staff appraisal and policy recommendations
- Macroeconomic outlook:
  - Rwanda is nearing a turning point with key elements of a market economy established and progress toward macroeconomic stability; a window exists to improve productivity, generate employment, and strengthen exports.
  - Uncertainty remains on timing and magnitude of growth.
- Core staff recommendations:
  - Strengthen substantially the implementation of economic policies.
  - Shift to grant-based financing of the growth strategy until growth is placed on a firmer footing and external debt indicators improve.
  - Limit new external public borrowing and persuade development partners to provide substantially increased grant assistance.
  - Retain objective of limiting the NPV of debt-to-exports ratio to 150 percent over the medium to long term.
  - Bring banks into compliance with prudential regulations to support monetary policy effectiveness and financial stability.
  - Improve tax efficiency and avoid new tax exemptions; strengthen the revenue authority.
  - Ensure fiscal spending increases are effectively sterilized to maintain inflation objectives.

*Source: IMF staff report excerpt in _cr04382 - 31. The Rwandan authorities recognized that the sustainability of their growth strategy would, even in the best of circumstances, hinge critically on reducing external imbalances over the medium term.*

### 49.     While Rwanda has made substantial advances in the design and implementation

### 49.     While Rwanda has made substantial advances in the design and implementation 

### Growth strategies and sectoral priorities
- Health and education: substantial advances in the design and implementation of programs.
- Agriculture: the agricultural growth strategy needs to be expeditiously updated, in consultation with the World Bank and other partners.
- Export promotion: the export promotion strategy appears feasible and should be implemented urgently.
- Rationale: jump-starting growth in agriculture and exports—sectors that account for the largest part of the economy—is key to realizing faster economic growth and external sustainability.

### Investment, private sector, and constraints to sustained GDP growth
- Sustained high GDP growth could require significant increases in investment over a long period.
- Current public investment focus: health and education, infrastructure, and government support for energy and tourism initiatives.
- Private investment: signs that private investment is set to increase are not readily apparent; outside of cellular telecommunications and the methane energy project, the formal sector has foundered.
- Regional peace: the critical role of regional peace in creating conditions conducive for private investment is highlighted.

### Regional integration, commerce, and prerequisites for growth
- Lack of natural resources and scarce human capital make durable peace and expansion of commerce with the eastern DRC critical prerequisites for growth and investment.
- Initiatives underway: entry into the EAC and SADC and the establishment of an EPZ are targeted at increasing market size and creating competitive niches.
- Caveat: escape from a tragic history depends on Rwanda, its neighbors, and the international community establishing conditions for peace.

### Fiscal sustainability, financing, and prioritization
- Fiscal sustainability remains a serious concern.
- Domestic revenue: achievement of domestic revenue targets is likely to be challenging given lackluster formal sector performance.
- Scaling-up of programs (health, education, water, infrastructure) would increase the structural deficit.
- Borrowing: increased borrowing from the World Bank and AfDB could finance part of the expansion, but:
  - This departs from the progressive reduction in imbalances targeted under the PRGF.
  - The availability of such resources is not assured over the long run.
  - Continued borrowing at the level projected for 2005 would be imprudent, given Rwanda’s vulnerability to shocks and debt sustainability considerations.
- Recommendations:
  - Authorities and partners should work to increase external grant financing, to the full extent possible.
  - Authorities need to clearly prioritize budgetary operations, establish contingencies, and limit spending to a sustainable level.

### Monetary aggregates, central bank operations, and banking system responsiveness
- Money growth: recent slower-than-targeted money growth is appropriate given slowdown in formal sector activity induced largely by an electricity shortage.
- Structural shift: unexplained shift in the structure of the monetary base has reduced the money multiplier and the effectiveness of central bank security auctions.
- Fiscal timing risk: skew of government spending to the second half of the year makes maintaining monetary stability challenging in the months ahead.
- Actions needed:
  - Improve understanding of the increase in currency in circulation.
  - Further strengthen coordination between the central bank and Treasury to ensure spending increases are not destabilizing.
  - Improve the responsiveness of the banking system to changes in economic fundamentals.

### Exchange rate regime and foreign exchange operations
- Regime assessment: the current floating exchange rate regime continues to serve Rwanda well.
- Justification: Rwanda's vulnerability to external shocks and demonstrated capacity to limit inflation to moderate levels make a market-based exchange rate system a natural choice.
- Operational need: with large government spending increases financed by external assistance, the weekly foreign exchange auction will need to improve to assure effectiveness of central bank policy implementation.
- Recent step: authorities increased the out-of-market limits (described as welcome).
- Export strategy: prompt implementation of the export promotion strategy should help improve Rwanda's export competitiveness.

### Banking sector health and supervisory enforcement
- Privatization: recent sale of majority shares in BCR and BACAR is a significant step toward strengthening the banking system and could reinvigorate the interbank market.
- Compliance: compliance with banking regulations during the first half of 2004 remained partial and uneven.
- Supervisory expectations: when commercial banks do not provide acceptable action plans for compliance or fail to implement them, the central bank should act promptly with close supervision and enforce cascading sanctions as necessary.

### Debt relief prospects, vulnerability, and borrowing benchmarks
- HIPC: with solid macroeconomic performance during 2004, Rwanda could reach the completion point under the enhanced HIPC Initiative, reducing the external debt stock to a sustainable level.
- Export performance: government commitment to improving exports is clear, but performance during 2002–03 shows that realization of high export growth rates is not assured.
- Vulnerabilities: Rwanda remains vulnerable to climatic and international price shocks.
- Borrowing guidance: borrowing plans should take such risks into account and aim to stay below the 150 percent NPV of debt-to-exports ratio over the medium to long term.

### Statistics, capacity, and technical assistance
- Statistical weaknesses: Rwanda's statistical base has significant limitations for surveillance, particularly in national accounts, government finance, balance-of-payments, and banking sector statistics.
- Priority: further strengthening of these statistics remains a priority for the authorities.
- Technical assistance: authorities should take full advantage of available technical assistance, including from the Fund.
- Capacity building: productive use of Fund technical assistance to date is commendable; given limited human resources and the agenda to strengthen government institutions and civil service capacity, continued efficient use of technical assistance resources from the Fund and other partners is important.

*Source: _cr04382 - 49. While Rwanda has made substantial advances in the design and implementation*

### 59.     It is recommended that the next Article IV consultation with Rwanda be held in

### It is recommended that the next Article IV consultation with Rwanda be held in accord with the provisions of Board Decision No. 12793-(02-76) approved on July 15, 2002.

### Exchange rates (Selected, 1997-2004)
- Effective Exchange Rates, January 1997- June 2004: (1997 average=100; foreign currency per Rwanda franc) — series depicted with index values around 50–120 for Nominal effective exchange rate and Real effective exchange rate across 1997–2004.
- Nominal Bilateral Exchange Rates, January 1999- July 2004: (Rwanda francs per U.S. dollar) — Official exchange rate and Informal market exchange rate series depicted with ranges approximately 300–650 across 1999–2004.

### Key economic and financial indicators (1996–2004) — selected datapoints and definitions
- Real GDP growth (annual percent): series shown for 1996–2004.
- Inflation (annual percentage change in consumer price index): series shown for 1996–2004.
- Broad money (annual percentage change): series shown for 1996–2004.
- Savings and Investment 2/:
  - Total investment and Government investment and Gross domestic savings series shown for 1996–2004.
- Government Finances 2/ (percent of GDP unless otherwise indicated):
  - Total expenditures, Revenues 4/, Overall balance 4/ series shown for 1996–2004.
- External Developments 2/:
  - Trade balance, Current account balance 4/, Government savings series shown for 1996–2004.
- Notes on definitions:
  - 1/ In percent of beginning of period stock of broad money.
  - 2/ In percent of GDP.
  - 3/ Forecast includes all committed external financing.
  - 4/ Excluding grants.

### Table 1 — Selected Economic and Financial Indicators, 2001–07 (selected series and exact numbers)
- Output and prices (annual percentage changes and levels shown in table):
  - Real GDP growth: 6.7, 7.3, 9.4, 6.1, 3.2, 0.9, 6.0, 6.0, 6.0, 6.0, 5.8 (series heading across columns).
  - GDP deflator: 0.2, 1.9, 0.0, 3.5, 4.9, 8.7, 2.7, 5.0, 4.0, 4.0, 3.0.
  - Consumer prices (period average): 3.4, 2.0, 2.0, 3.0, 4.7, 7.4, 3.0, 6.9, 4.0, 4.0, 3.0.
- External sector (percent or levels as table):
  - Export, f.o.b (U.S. dollars): 4.2, -16.9, -28.1, 2.1, 6.6, -6.3, 10.6, 8.0, 3.8, 9.0, 9.8.
  - Imports, f.o.b (U.S. dollars): -0.8, 0.5, -1.3, 3.2, 8.5, 4.0, 2.8, 16.0, 7.8, 5.5, 5.2.
- Government finance (percent of GDP unless otherwise indicated):
  - Revenue: 25.5, 16.9, 16.9, 14.0, 18.5, 21.4, 10.7, 10.8, 11.0, 9.4, 8.9.
  - Total expenditure and net lending: 20.0, 15.5, 11.3, 9.6, 15.1, 23.8, -3.7, 30.8, 15.2, -3.8, 3.8.
  - Current expenditure: 20.4, 16.6, 15.2, 7.3, 20.7, 31.5, -8.3, 9.9, 25.0, -11.2, -0.9.
- Money and credit (annual percent changes, in percent of beginning-of-period broad money):
  - Broad money (M2): 9.2, 6.9, 11.4, ... , 8.0, 15.2, ... , 11.0, ...
  - Reserve money: 6.6, 6.3, 11.9, ... , 7.1, 12.2, ... , 11.6, ...
- National income accounts (in percent of GDP):
  - National savings (excluding official transfers): 2.5, 1.8, 0.3, 3.5, 1.2, -0.8, 2.6, -0.1, 2.5, 3.6, 5.2.
  - Gross investment: 18.4, 18.8, 16.9, 19.3, 19.9, 18.4, 20.0, 21.3, 22.3, 22.7, 23.2.
- External sector (in percent of GDP):
  - External current account balance including official transfers: -5.9, -11.3, -6.7, -11.5, -11.3, -7.8, -12.3, -6.9, -6.0, -7.6, -8.0.
  - Excluding official transfers: -15.9, -17.0, -16.6, -15.7, -18.7, -19.2, -17.4, -21.4, -19.8, -19.1, -17.9.
- External debt (end of period, percent of GDP): 78.4, 73.2, 80.9, 66.8, 86.1, 85.1, 82.2, 86.6, 85.4, 82.5, 78.0.
- Net present value of external debt (in percent of exports of goods and services): 236.2, 190.3, 287.2, 203.5, 222.2, 315.2, 242.1, 354.5, 365.8, 363.2, 359.5.
- Scheduled debt-service ratio after HIPC Initiative debt relief (in percent of exports of goods and services): 9.3, 15.4, 13.8, 9.1, 9.1, 9.3, 10.0, 9.6, 12.0, 10.5, 11.1.
- Gross reserves (in months of imports of goods and services): 6.0, 5.9, 6.3, 6.2, 7.4, 5.2, 6.9, 4.6, 5.2, 5.5, 6.0.
- External debt (end of period, US$ million): 1,336.1, 1,295.1, 1,401.0, 1,268.4, 1,471.4, 1,432.8, 1,493.0, 1,485.5, 1,556.2, 1,592.3, 1,608.8.
- Gross official reserves (US$ million): 212.1, 223.6, 243.6, 236.6, 299.1, 214.2, 282.5, 208.6, 242.1, 265.2, 300.3.
- Memorandum: Nominal GDP (in billions of Rwanda francs): 754.3, 825.2, 825.0, 906.4, 893.4, 905.3, 971.9, 1,004.9, 1,100.5, 1,201.3, 1,308.6.

### Table 2 — Operations of the Central Government, 2001–07 (selected exact entries)
- Revenue and grants (in billions of Rwanda francs): 148.2, 160.3, 101.2, 93.2, 159.3, 134.4, 228.5, 195.5, 262.4, 292.8, 300.9, 315.5 (series over columns).
- Total revenue: 86.2, 101.2, 57.6, 59.9, 88.4, 90.3, 119.4, 122.3, 135.6, 150.5, 164.7, 179.4.
  - Tax revenue: 79.5, 94.6, 53.4, 55.4, 82.8, 83.9, 112.4, 114.6, 126.3, 141.2, 154.5, 168.2.
    - Direct taxes: 24.5, 30.5, 15.3, 17.6, 24.0, 25.4, 32.0, 35.1, 37.8, 39.8, 43.3, 47.3.
    - Taxes on goods and services: 41.0, 47.4, 27.5, 27.4, 42.6, 42.6, 58.2, 57.5, 63.8, 72.3, 79.5, 87.3.
    - Taxes on international trade: 14.0, 16.7, 10.6, 10.4, 16.2, 16.1, 22.3, 22.1, 24.7, 29.1, 31.7, 33.6.
  - Grants: 62.0, 59.1, 43.6, 33.3, 71.0, 44.1, 109.1, 73.1, 126.9, 142.3, 136.2, 136.1.
    - Budgetary grants: 33.9, 39.3, 25.9, 22.2, 44.4, 27.5, 73.6, 51.0, 92.1, 95.8, 82.8, 75.8.
    - HIPC Initiative assistance (of which): 10.6, 12.2, 5.1, 5.8, 9.0, 9.3, 11.6, 11.5, 15.9, 19.3, 0.0, 0.0.
- Total expenditure and net lending: 158.1, 175.9, 112.0, 100.6, 166.1, 160.9, 220.5, 217.8, 284.7, 314.1, 302.3, 313.9.
  - Current expenditure: 107.4, 123.7, 75.5, 73.4, 112.3, 118.5, 149.3, 162.7, 178.8, 208.5, 185.2, 183.5.
  - Capital expenditure: 50.0, 40.7, 35.3, 26.2, 52.1, 38.9, 69.0, 51.1, 87.2, 104.7, 116.2, 130.5.
- Primary balance 3/: -0.8, -12.9, -4.0, -1.8, 2.2, -1.2, 7.1, -2.8, -26.1, -44.3, -18.8, -14.5.
- Domestic fiscal balance 4/: -20.4, -34.8, -23.9, -18.0, -31.8, -36.8, -39.1, -50.2, -78.7, -83.4, -46.3, -32.1.
- Overall deficit (payment order) After grants: -9.9, -15.6, -10.8, -7.3, -6.8, -26.4, 8.0, -22.3, -22.3, -21.4, -1.4, 1.6.
  - Before grants: -71.9, -74.8, -54.4, -40.6, -77.7, -70.6, -101.1, -95.4, -149.2, -163.7, -137.6, -134.5.

### Financing and Memorandum items (from Table 2 continuation)
- Financing (in billions of Rwanda francs): 42.6, 30.9, 15.2, 18.0, 10.1, 21.6, 13.9, 27.2, 42.4, 28.4, 8.4, -1.6.
  - Foreign financing (net): 40.9, 30.5, 9.4, 8.0, 12.0, 9.7, 43.7, 22.0, 45.0, 50.3, 41.1, 29.1.
  - Domestic financing: 1.7, 0.4, 5.7, 10.0, -1.8, 12.0, -29.8, 5.2, -2.6, -21.9, -32.7, -30.7.
- Memorandum items (in percent of GDP):
  - Revenue and grants: 19.6, 19.4, 11.4, 10.3, 17.8, 14.8, 25.6, 21.6, 26.1, 26.6, 25.1, 24.1.
  - Total expenditure and net lending: 21.0, 21.3, 12.5, 11.1, 18.6, 17.8, 24.7, 24.1, 28.3, 28.5, 25.2, 24.0.
  - Nominal GDP (in billions of Rwanda francs): 754.3, 825.0, 893.4, 905.3, 893.4, 905.3, 893.4, 905.3, 1,004.9, 1,100.5, 1,201.3, 1,308.6.

### Table 3 — Monetary Survey, 2003–04 (selected exact entries)
- Monetary authorities (in billions of Rwanda francs):
  - Net foreign assets: 70.3, 54.6, 101.0, 57.8, 65.5, 65.0, 66.7, 55.4, 70.3, 70.2, 64.5, 62.3.
  - Net domestic assets: -24.9, -4.5, -54.1, -7.4, -15.1, -12.0, -15.3, -1.4, -17.2, -17.1, -8.6, -6.0.
  - Reserve money 4/: 44.1, 50.1, 46.9, 50.4, 50.4, 53.0, 51.3, 54.0, 53.0, 53.0, 55.9, 56.3.
    - Currency in circulation: 26.9, 32.1, 29.0, 34.1, 34.1, 34.6, 31.9, 35.1, 37.5, 37.5, 36.9, 37.6.
- Commercial banks (selected):
  - Net foreign assets: 35.5, 29.4, 33.5, 34.0, 38.7, 37.5, 36.6, 44.5, 39.1, 39.0, 39.7, 41.9.
  - Domestic credit: 88.1, 103.8, 94.0, 104.4, 104.4, 101.5, 96.6, 108.9, 98.6, 98.6, 113.3, 115.2.
  - Deposits: 118.2, 120.3, 121.4, 125.6, 130.0, 134.0, 126.8, 139.0, 121.6, 121.6, 139.0, 144.9.
- Monetary survey totals (selected):
  - Net foreign assets: 105.7, 84.0, 134.5, 91.8, 104.2, 102.5, 103.2, 99.9, 109.4, 109.2, 104.3, 104.2.
  - Net domestic assets: 43.4, 71.5, 20.9, 70.9, 62.9, 69.1, 59.5, 77.2, 52.1, 52.2, 74.6, 81.3.
  - Broad money: 148.9, 155.5, 155.4, 162.7, 167.1, 171.6, 162.7, 177.1, 161.5, 161.4, 178.9, 185.4.

### Table 4 — Balance of Payments, 2001–07 (selected exact entries)
- Exports, f.o.b. (US$ million): 93.5, 77.5, 67.3, 87.3, 71.0, 71.8, 63.0, 76.6, 79.6, 95.2 (series across columns).
  - Of which: coffee: 19.4, 22.6, 14.6, 28.9, 16.8, 15.0, 21.1, 22.0, 26.2, 31.5.
- Imports, f.o.b. (US$ million): 237.9, 256.5, 234.7, 264.7, 253.6, 244.0, 260.1, 280.4, 295.7, 311.1.
- Trade balance (US$ million): -144.4, -179.0, -167.4, -177.7, -181.8, -181.0, -183.5, -200.8, -209.0, -215.9.
- Current account balance (including official transfers, US$ million): -100.3, -200.4, -116.7, -216.4, -193.4, -131.1, -106.7, -110.1, -147.2, -166.0.
- Current account balance excluding official transfers (US$ million): -270.5, -301.4, -287.0, -298.8, -320.2, -323.6, -335.6, -360.5, -368.5, -370.3.
- Capital and financial account balance (US$ million): 145.3, 80.2, 108.1, 107.8, 97.5, 66.9, 94.4, 142.0, 176.9, 211.7.
- Overall balance (US$ million): 24.4, -120.1, 19.3, -108.6, -96.0, -36.9, -12.3, 31.9, 29.7, 45.7.
- Gross official reserves (US$ million): 212.1, 223.6, 243.6, 236.6, 299.1, 214.2, 282.5, 208.6, 242.1, 265.2, 300.4.
- Memorandum: Current account deficit (in percent of GDP) — excluding official transfers: -15.9, -17.0, -16.6, -15.7, -18.7, -19.2, -19.6, -19.8, -19.1, -18.0; including official transfers: -5.9, -11.3, -6.7, -11.4, -11.3, -7.8, -6.2, -6.0, -7.6, -8.0.

### Table 5 — External financing requirements and sources, 2001–07 (selected exact entries)
- Resource balance (US$ million): -269.7, -292.5, -324.4, -332.3, -360.6, -375.2, -380.0.
  - Exports goods and nonfactor services: 157.1, 132.7, 139.5, 158.1, 169.1, 183.4, 198.7.
  - Imports goods and nonfactor services: 426.8, 425.2, 463.9, 490.4, 529.7, 558.6, 578.7.
- External financing requirements (US$ million): -371.5, -302.3, -311.6, -395.9, -443.9, -405.8, -378.3.
  - Disbursements-existing: 324.1, 296.5, 274.3, 232.6, 210.4, 220.4, 207.8.
    - Grants (project and nonproject): 233.6, 211.9, 233.6, 185.4, 168.8, 174.0, 179.9.
    - Loans (project and nonproject): 78.4, 83.9, 39.9, 47.2, 41.7, 46.4, 27.9.
  - Exceptional financing (signed): 38.6, 5.9, 30.7, 2.7, ...
  - Available financing: 371.5, 302.3, 311.6, 395.9, 443.9, 405.8, 378.3.

### Table 6 — External public debt and debt service, 2001–07 (selected exact entries)
- Total external debt outstanding (US$ million): 1,336.1, 1,401.0, 1,432.8, 1,485.5, 1,556.2, 1,592.3, 1,608.8.
- Multilateral (US$ million): 1,185.2, 1,249.0, 1,273.6, 1,338.2, 1,414.9, 1,455.4, 1,475.9.
  - Of which IDA: 767.4, 833.9, 847.3, 917.4, 989.7, 1,043.8, 1,084.8.
  - IMF: 84.3, 84.9, 91.9, 87.5, 79.5, 65.1, 46.8.
- Bilateral (US$ million): 150.4, 151.5, 158.6, 146.8, 140.7, 136.3, 132.4.
  - Paris Club: 74.1, 75.5, 76.7, 73.2, 70.0, 68.1, 66.2.
  - Non-Paris Club: 76.3, 76.0, 81.8, 73.6, 70.7, 68.2, 66.2.
- Debt service after bilateral rescheduling (US$ million): 38.6, 43.8, 36.2, 40.7, 48.1, 55.8, 60.4.
  - Principal: 27.3, 32.3, 24.0, 28.7, 35.6, 43.0, 45.3.
  - Interest: 11.3, 11.5, 12.2, 12.0, 12.5, 12.8, 15.1.
- HIPC Initiative assistance (US$ million): 23.9, 25.6, 23.3, 27.5, 36.0, 43.1, 44.3.
- Debt service after HIPC Initiative assistance (US$ million): 14.7, 18.2, 12.9, 13.2, 20.2, 19.2, 22.1.
- Memorandum: Total debt stock (in percent of GDP): 78.4, 80.9, 85.1, 86.6, 85.4, 82.5, 78.0.
- Net present value (NPV) of debt (US$ million): 330.6, 420.7, 450.9, 505.7, 569.1, 618.2, 660.5.
- NPV of debt-to-exports ratio: 236.2, 287.2, 315.2, 352.6, 365.8, 363.2, 359.5.

*Source: Rwandese authorities; and Fund staff estimates and projections (from the IMF staff report tables and figures excerpted in the content unit).*

### APPENDIX                                                                        I

### APPENDIX I — Rwanda: Relations With the Fund (As of July 31, 2004)

### I. Membership Status
- Joined: 09/30/1963
- Article VIII

### II. General Resources Account (GRA)
- Quota: 80.10 SDR million — 100.00 percent
- Fund holdings of currency: 80.11 SDR million — 100.02 percent
- Reserve position in Fund: 0.00 SDR million — 0.00 percent

### III. SDR Department
- Net cumulative allocation: 13.70 SDR million — 100.00 percent
- Holdings: 19.80 SDR million — 144.57 percent

### IV. Outstanding Purchases and Loans
- PRGF arrangements: 61.79 SDR million — 77.14 percent of quota

### V. Financial Arrangements
- PRGF (ESAF/PRGF)
  - Approval date: 08/12/2002
  - Prior approval date listed: 06/24/1998
  - Expiration date: 08/11/2005
  - Prior expiration date listed: 04/30/2002
  - Amount approved: 4.00 SDR million and 71.40 SDR million (two line items shown)
  - Amount drawn: 2.29 SDR million and 61.88 SDR million (two line items shown)
- SAF
  - Approval date: 04/24/1991
  - Expiration date: 04/23/1994
  - Amount approved: 30.66 SDR million
  - Amount drawn: 8.76 SDR million
- Stand-by
  - Approval date: 10/31/1979
  - Expiration date: 10/30/1980
  - Amount approved: 5.00 SDR million
  - Amount drawn: 0.00 SDR million

### VI. Projected Obligations to the Fund (SDR million; based on existing use of resources and present holdings of SDRs)
- Forthcoming 2004–2008 (by year)
  - 2004 Principal: 2.38
  - 2005 Principal: 6.66
  - 2006 Principal: 10.47
  - 2007 Principal: 12.38
  - 2008 Principal: 11.36
  - 2004 Charges/Interest: 0.15
  - 2005 Charges/Interest: 0.29
  - 2006 Charges/Interest: 0.25
  - 2007 Charges/Interest: 0.19
  - 2008 Charges/Interest: 0.12
  - 2004 Total: 2.53
  - 2005 Total: 6.95
  - 2006 Total: 10.72
  - 2007 Total: 12.56
  - 2008 Total: 11.48

### VII. Implementation of HIPC Initiative — Enhanced framework
- Commitment of HIPC assistance
  - Decision point date: 12/22/2000
  - Assistance committed (end-1999 NPV terms): 26
  - Total assistance (US$million): 452.00
  - Of which: Fund assistance (US$million): 43.80
  - (SDR equivalent in millions): 33.81
- Completion point date: Floating
- Delivery of Fund assistance (SDR million)
  - Amount disbursed: 14.45
  - Interim assistance: 14.45
  - Completion point: ...
  - Additional disbursement of interest income: ...
  - Amount applied against member’s obligations (cumulative): 14.45
- Notes from source:
  - "NPV terms at the decision point under the enhanced framework."
  - "Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period."

### VIII. Safeguards Assessments
- The Banque Nationale du Rwanda (BNR) is subject to a safeguards assessment under the PRGF arrangement.
- A Safeguards Assessment was completed on April 14, 2003, and the proposed recommendations have largely been implemented.

### IX. Exchange System
- On March 6, 1995, Rwanda adopted a market-determined exchange rate system.
- Before then, the Rwanda franc was pegged to the SDR.
- In December 1998, Rwanda accepted the obligations under Article VIII, Sections 2, 3 and 4 of the IMF.
- In 2001, a foreign exchange auction system was put in place with technical assistance from MFD.
- Since February 7, 2001, auctions have been taking place on a weekly basis.

### X. Article IV Consultation
- Rwanda is on the revised 24-month consultation cycle.
- The Executive Board discussed the staff report for the 2002 Article IV consultation on July 24, 2002.

### XI. FSAP Participation, ROSCs, and OFC Assessments
- A Report on Observance of Standards and Codes on Fiscal Transparency (ROSC) was issued in July 2003.
- A Financial Sector Assessment Program (FSAP) is planned in the latter half of 2004.
- Rwanda has not had an Offshore Financial Center (OFC) assessment.

### XII. Technical Assistance (selected by year and mission)
- 1999: FAD long-term experts (tax policy, budget preparation, treasury management); MFD long-term general advisor to governor of NBR; MFD experts on banking supervision and foreign exchange market operations
- 2000: FAD experts on budget execution and on tax policy; MFD experts on foreign exchange market operations, and banking supervision; STA missions on money and banking statistics and on balance of payments statistics
- 2001: FAD experts on expenditure management and on tax policy; FAD mission on tax policy; MFD mission on foreign exchange policy, monetary policy, and banking supervision; MFD expert on monetary policy implementation; FAD mission on assessment of tracking of poverty reducing expenditure, and the fiscal ROSC; MFD expert on banking supervision; FAD experts on expenditure management, and on tax policy (until mid-year)
- 2002: MFD expert on banking supervision (until November); MFD expert on monetary and foreign exchange rate policy; AFRITAC East work plan mission
- 2003: AFRITAC East mission on statistical issues; FAD mission on fiscal ROSC and budget management system; AFRITAC East mission on developing the market for government treasury bills; FAD mission on reform of investment incentives and tax reform; MFD expert on monetary and foreign exchange rate policy; MFD expert on banking supervision and regulation; MFD missions on banking supervision; MFD mission on foreign reserves management; STA multi-sector statistics mission; FAD mission on Decentralization
- 2004: FAD tax administration expert on strengthening of revenue administration; MFD expert on banking supervision and regulation; MFD expert on monetary policy, monetary operations, and money markets; MFD missions on on-site banking supervision

### XIII. Resident Representative
- Mr. Abdikarim Farah completed his posting as Resident Representative in Kigali on June 30, 2004.

*Source: APPENDIX I — Rwanda: Relations With the Fund (As of July 31, 2004).*

### 2004. His replacement remains in process.

### Rwanda: Relations with the World Bank (As of August 5, 2004)

### Partnership for Rwanda’s Development Strategy
- Donor agencies have been key players since the genocide, supporting reconstruction, national reconciliation, and economic reform.
- The Poverty Reduction Strategy Paper (PRSP) was completed in June 2002 and was discussed by the Boards of the IDA and the IMF on August 12, 2002.
- PRSP objective: halving poverty by 2015 through private sector and rural sector strategies.
- PRSP priority areas (six): (1) rural development and agricultural transformation; (2) human development; (3) economic infrastructure; (4) good governance; (5) private sector development; and (6) institutional capacity building.
- Stakeholder engagement: civil society, government agencies and ministries, and donors actively involved in PRSP process and monitoring.
- PRSP timeline: first progress report issued July 2003; Bank-Fund JSA produced May 2004; second PRSP progress report under preparation and expected end-August 2004.

### World Bank Group Program and Portfolio
- Last Country Assistance Strategy (CAS) discussed by World Bank Board in December 2002; aligns with PRSP and emphasizes move from project-based approaches to budget support.
- Poverty Reduction Strategy Credit (PRSC) under preparation; expected Board consideration in October 2004.
- Proposed PRSC objectives:
  - (i) strengthen GoR capacity to plan and budget results-oriented public sector actions supporting PRSP implementation;
  - (ii) develop incentive frameworks through performance-based payments and contracting;
  - (iii) establish strong accountability mechanisms to enhance citizen monitoring and feedback to service providers;
  - (iv) implement a sound fiduciary framework and monitoring and evaluation system for transparency and accountability in service delivery (health, education, water, energy).

### International Development Association (IDA) Program
- Since 1970, Rwanda received 58 IDA credits and grants totaling US$1,268.6 million.
- As of end-July 2004, disbursements from IDA to Rwanda totaled about US$921.3 million, with a total undisbursed balance of US$231.1million.
- Current portfolio (as of July 2004): ten operations with total commitment value of US$281.3 million of credits and grant facilities of US$30.5 million for an HIV/AIDS project and US$20 million for a decentralization and community development project.
- IDA financing areas: (i) infrastructure (roads, electricity, water, sanitation); (ii) agriculture, rural development, forestry; (iii) social infrastructure (health, population, education, training); (iv) private sector development, public enterprise reform, financial development, technical assistance; (v) two policy-based quick-disbursing operations.
- Post-genocide response: two emergency budget support operations and a social fund-type project; restructuring of prewar investment portfolio to meet emergency and transition needs.

### International Finance Corporation (IFC) Program
- IFC investments in Rwanda include:
  - FY1998: US$0.53 million in Highland Flowers;
  - FY2000: US$6.0 million in RWANDACELL;
  - December 2000: US$0.8 million for an apartment hotel in Kigali.
- IFC technical assistance focused on privatization, SMEs, financial and industrial sectors.
- Earlier investment in Rwandan match factory (SORWAL) noted.

### Multilateral Investment Guarantee Agency (MIGA) Program
- Rwanda signed and ratified the MIGA Convention on October 27, 1989.
- On September 27, 2002, Rwanda became a full member of MIGA after completing membership requirements.
- Rwanda elected to MIGA’s Board of Directors during the World Bank/IMF annual meetings in Washington.
- MIGA cooperative initiative: secondment of a senior underwriter to COMESA to work on creation of the Africa Trade Insurance Agency (ATI), officially launched in July 2001 in Uganda.
- Rwanda is a founding member of ATI; ATI headquartered in Nairobi, Kenya, provides political risk insurance for trade credits in African countries.

### World Bank-IMF Collaboration in Specific Areas
- Collaboration deepened in context of PRSP and HIPC processes.
- Areas led by the IMF:
  - Macroeconomic policy dialogue (fiscal and monetary policies).
  - IMF support through ESAF/PRGF arrangements; new three-year arrangement started August 2002.
  - Second and third review of arrangement completed in June, 2004.
  - PRGF arrangement supports comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty.
  - Structural reforms under PRGF focus on raising revenue to make room for poverty-related spending, strengthening public expenditure management, and financial governance.
- Areas led by the World Bank:
  - Structural and institutional reforms in infrastructure (roads, communication, water, sanitation, energy), private sector development, agriculture and rural development, social sectors (health and HIV/AIDS, education, community development), demobilization and reintegration.

### Broad Structural and Policy Reforms
- First structural adjustment loan approved June 1991.
- Emergency recovery credits approved in 1995 and 1997 (US$50 million each).
- March 1999: Economic Recovery Credit (ERC) equivalent to US$75 million approved; disbursed in three tranches, last at end-March 2001.
- December 2000: supplement to ERC of US$15 million approved and disbursed in March 2001.
- Institutional Reform Credit (IRC) of US$85 million approved December 2, 2002:
  - First tranche US$45 million disbursed December 2002;
  - Second tranche disbursed May 2004.
  - Tranche release triggers: adoption of MTEF budgeting, completion of Financial Accountability Review and Action Plan (under implementation), privatization of key government undertakings (energy, telecommunications, tea factories), legal reforms to promote gender equality, privatization of Banque Commercial de Rwanda (BCR).
  - Privatization of BCR completed at the beginning of August 2004; disbursement of remaining US$20 million expected very soon.
- Upcoming PRSC focus areas: (i) pro-poor public expenditures in education, health, water/sanitation, and energy; (ii) improved quality, efficiency, and equity of service delivery; (iii) policies to promote sustainable economic growth supporting increased productivity of rural populations through increased access to social services and support to export agriculture.

### Infrastructure and Private Sector Development Projects
- Closed projects that strengthened capacity and rebuilt infrastructure:
  - Transport Sector Project: sector policy reform, planning capacity, improved road maintenance, private sector promotion, main road construction, communal activities.
  - Second Communications Project (closed June 30, 1999): institutional reform, investments to create autonomous operating entities for telecommunications and postal services, regulatory framework for private sector entry.
  - Energy Sector Project: national energy policies and framework for private sector participation.
  - Second Water Supply Project: repair of damaged systems, evaluation of water needs in secondary cities, rehabilitation of rural water supply systems.
  - Rural Water Supply and Sanitation (Board approved June 2000) to continue Second Water Supply Project activities with emphasis on community participation.
- New projects being prepared in transport, energy, and urban infrastructure.
- PRSC will support reforms and policies in water/sanitation and energy to improve quality, efficiency, and equity of service delivery.

### Private Sector Development Details
- Private Sector Development Project (closed September 2000) promoted private sector expansion via incentives for labor-intensive, export-oriented activities within improved economic and legal frameworks.
- Competitiveness and Enterprise Development Project (CEDP) approved April 19, 2001:
  - Continue telecommunications reform and privatization of telephone monopoly and tea factories.
  - Provide support to energy and water sectors via management and rehabilitation funds (including management contract fees).
  - Assist government in privatizing remaining state-owned enterprises.
  - Support financial sector reforms: (i) address issues in the commercial banking sector; (ii) strengthen micro-finance sector.
  - Support private sector development institutions (investment promotion, business environment improvement).
- Regional Trade Facilitation Project (RTFP) aims to contribute to poverty alleviation through private sector-led growth by improving access to financing for productive transactions and cross-border trade.

### Agriculture and Rural Development
- Rural Sector Support Project (RSSP) approved March 2001:
  - Objectives: reduce smallholders’ incentives for autarchy, promote adoption of improved inputs, raise productivity and incomes among rural populations.
  - Supports programs to increase agricultural productivity, develop rural agricultural and nonagricultural enterprises, and promote farmers' organizations for adoption and dissemination of new farming technologies.

### Social Sector Support
- Education Sector Project and Health and Population Project approved in 1991 to restore social infrastructure post-1994 genocide.
- Education Project finalized June 2000.
- June 6, 2000: Board approved US$35 million Human Resources Development Project (HRDP) to improve education quality and access.
- Health and Population Project supported six health districts, essential drugs, national IEC capacity, and restructuring/decentralization of National AIDS Control Program.
- US$7 million supplemental to Health and Population Project approved end-2000 to continue activities pending design of new project.
- Community Reintegration and Development Project (CRDP) approved October 1998 promotes community reintegration and supports decentralization.
- Bank approved a grant of US$30.5 million for HIV/AIDS Prevention.
- HRDP and CEDP include HIV/AIDS components for prevention messaging among ministries’ staff and clients.
- Demobilization and Reintegration Project approved April 25, 2002 to demobilize and reintegrate ex-combatants.
- Additional social sector reform support and PRSP implementation to be provided through the upcoming PRSC.

### Community Development
- Decentralization and Community Development Project (DCDP), funded by a US$20 million grant approved June 2004:
  - Consolidate framework in four provinces and two districts in a fifth province to boost dynamic local economies through empowered communities.
  - Underpin national poverty reduction strategy and government decentralization policy.
  - Strengthen District capacity for planning and consultation with local communities.
  - Support local procedures for project finance and management, and promote transparency and public awareness.

### Areas of Shared Responsibility (IMF and World Bank)
- Ongoing collaboration on structural reforms in budgeting, expenditure and financial management, revenue control, and financial sector management.

- Budgeting, public expenditure management, and revenue control:
  - Joint World Bank-Fund assessment of government capacity to track poverty expenditures completed in 2001; update planned for May 2004.
  - IMF technical assistance missions in financial management, fiscal decentralization, and revenue management.
  - Bank support via Institutional Reform Credit and completion of Financial Accountability Review.
  - Detailed action plan for strengthening public financial management system completed; Bank to support implementation through IDA Public Sector Capacity Building Project (PSCBP) under preparation.

- Public Sector Reform and Capacity Building:
  - Fund monitors public service reforms by macroeconomic impacts and engages government on trade-offs.
  - DfID as lead donor preparing sizable program to support Rwanda’s Public Sector Reform Strategy.
  - Bank, DfID, and other partners to support reforms through PSCBP (US$20 million credit approved by Bank Board in July 2004).
  - PSCBP aims:
    - (i) attract, manage, and retain qualified staff;
    - (ii) improve quality and efficiency of service delivery through “contracting for performance” based on functional reviews to identify functions to contract out or decentralize;
    - (iii) use financial resources effectively, transparently, and accountably to achieve intended objectives.
  - PSCBP attention to public accountability and monitoring will be complemented by the Bank’s PRSC.

- Financial Sector:
  - World Bank support for restructuring banking sector and addressing nonperforming loans.
  - Bank-supported reviews of microfinance sector to inform sector strategy.
  - Upcoming technical assistance to support central bank on money laundering issues.
  - IMF provided technical assistance in banking supervision and prudential regulation.
  - A Financial Sector Assessment Program is planned.

*Source: Rwanda: Relations with the World Bank (As of August 5, 2004).*

### 2004. Currently, the IMF is providing long-term technical assistance to the Central

### _cr04382 - 2004. Currently, the IMF is providing long-term technical assistance to the Central

### Technical assistance and institutional capacity
- The IMF is providing long-term technical assistance to the Central Bank in:
  - monetary policy analysis,
  - banking supervision,
  - internal audit.
- The Fund is also providing technical assistance on the development of securities markets.
- DFID is supporting establishment of the “Institut National des Statistiques de Rwanda” with a component on national accounts to establish economic surveys and develop leading economic indicators.
- East AFRITAC assistance is focused on capacity building to construct short term indicators on the formal sector, starting with a monthly PPI for the manufacturing (formal) sector; DFID provides financial support. PPI for October 2003-June 2004 have been computed and are being analyzed.
- Contacts: Emmanuel Mbi (Tel. 202-473-4953) and Kene Ezemenari (Tel. 202-458-5559).

### Statistical system strengths and weaknesses
- Macroeconomic database: weak due in part to destruction from the 1994 war; progress has been made with technical assistance since the end of the war.
- Publications and coverage:
  - New annual publication initiated in 1998 covering major economic and financial statistics with historical data (or estimates) dating back to 1990.
  - Rwanda has very few statistical publications.
- National accounts and price statistics, government finance, and balance of payments statistics suffer from significant quality weaknesses.
- Monetary statistics are adequate for surveillance and program monitoring but require further improvement in quality and timeliness.
- Data relevant for banking supervision have scope for improvement.
- Employment and wage data: not collected except for central government and daily informal work.

### Real sector and price statistics
- National accounts:
  - Prepared by Statistics Directorate of MINECOFIN; data compiled starting from 1990 but quality is weak due to shortages of resources.
  - New benchmarking GDP estimates (2001) developed with EREBS in February 2004 show an increase by about 7 percent compared to previous estimates.
- CPI:
  - NBR established an improved CPI covering 438 goods, sample of more than 25,000 observed in Kigali (weighted 77 percent) and eleven provincial towns.
  - CPI based on a survey of 6,450 households in 2000/01 and on average 2003 prices.
  - Composition: local goods 70 percent, imported goods 30 percent; food and drinks 37 percent; housing and energy 16 percent.
  - Shortcomings: infrequently purchased products aggregated into groups with same weight; index of underlying inflation excludes 53 percent of goods as seasonal or exchange-rate-determined.
  - In 2003, old and new indices developed closely, though the old index indicated higher inflation pressures during the monetary overhang in the last quarter of 2003 than the new index.
- Real sector data reported regularly for publication in International Finance Statistics (IFS), with some lags, particularly GDP estimates.

### Government finance statistics
- Authorities report detailed monthly revenue and expenditure to the African Department with a lag of three–four weeks via a flash-reporting unit established in MINECOFIN in 1996 with Fund assistance.
- A functional classification of government expenditure was designed and presented with the 2003 budget; PRSP priority areas are identifiable within the economic classification.
- Fiscal data do not consistently capture capital expenditure because capital projects (mostly foreign financed) are mainly carried out by line ministries outside regular budget procedures; efforts underway to integrate development budget into normal procedures.
- Fiscal data often show discrepancies between above-the-line deficit and financing; adjustments made jointly by authorities and Fund staff for changes in non-core government accounts, cash in vault at revenue authority, accounting errors, and other factors.
- Selected annual central government aggregates through 2002 reported to STA and published in IFS, but exhibit large statistical discrepancies mainly due to timing of recording expenditures. No sub-annual data reported to STA; GFS Yearbook reporting only through 1993.

### Monetary and balance of payments statistics
- NBR transmissions:
  - Central bank balance sheet: weekly with a lag of one week.
  - Monetary survey and consolidated balance sheet of commercial banks: monthly with a lag of about four weeks.
  - Detailed interbank money market transaction data provided upon request.
- NBR actions:
  - Working group implemented recommendations of STA and MFD missions.
  - Adopted in June 2002 an improved classification of central bank balance sheet accounts related to government transactions.
  - Early 2004: adapted compilation framework to Monetary and Financial Statistics Manual.
  - Improvements contributed to inter-sectoral consistency of monetary and financial statistics.
- Balance of payments:
  - Foreign trade data provided by NBR; inconsistencies exist between NBR reports and customs data. Significant unrecorded trade and scarce information on invisible transactions.
  - Indications of significant under recording of official external transfers; poor data on level and composition of private flows.
  - Lack of well-trained staff for BOP compilation is a major impediment.
  - Trade in goods data mostly collected by customs except imports/exports of electricity, tea, and coffee; customs expected to take responsibility for these soon.
  - STA-recommended supplementary company surveys being implemented; NBR launched a unit for these surveys that still lacks adequate training.
  - Multisector mission (June 2003) recommended short-run improvements: (1) reorganize data entry and production of external trade statistics using ASYCUDA and Eurotrace; (2) adapt company survey forms to BPM5 methodology; (3) work with CEPEX to obtain exhaustive data on international and bilateral aid. Follow-up mission visited in January 2004.
  - Annual BOP and quarterly import/export data reported to STA and published in IFS, albeit with lags. Rwanda sent methodology notes included in Part 3 of the 2002 BOPSY.
- External public debt databases maintained by MINECOFIN and NBR; a committee was established to collect, harmonize, and monitor external public debt information.

### Operations of World Bank Group and IFC (as of August 5, 2004)
- Statement of IDA Credits:
  - Closed credits (48 credits closed): 795.5 (Original Credit Amount in US$ Million (Less Cancellations)); Undisbursed 0.0.
  - Active credits (selected listing with Original Credit Amount and Undisbursed):
    - 2001 Competitiveness and Enterprise Dev: 40.8 original; 31.05 undisbursed
    - 2000 Rural Water Supply and Sanitation: 20.0 original; 18.57 undisbursed
    - 2001 Regional Trade Facility: 7.5 original; 5.95 undisbursed
    - 2000 Human Resource Development: 35.0 original; 22.96 undisbursed
    - 2001 Rural Sector Support Project: 48.0 original; 44.68 undisbursed
    - 2002 Demobilization & Reintegration: 25.0 original; 18.60 undisbursed
    - 2003 HIV/AIDS: 30.5 original; 26.90 undisbursed
    - 2003 Institutional Reform Credit: 85.0 original; 22.12 undisbursed
    - 2004 Decentralization & Community Development: 20.0 original; 20.11 undisbursed
    - 2005 Public Sector Capacity Building: 20.0 original; 20.18 undisbursed
  - Total: active projects: 331.8 (Original Credit Amount); Undisbursed 231.12
  - Total approved amount: 1,268.6
  - Of which: repaid 84.1
  - Total held by the Bank and IDA 929.5
  - Note: Includes two emergency recovery credits of US$50 million each, approved in 1995 and 1997, respectively, and fully disbursed.
- IFC pending commitments in Rwanda amount to US$5.326 million (projects: Rwandacell, AEF Dreamland, AEF Highland).

### Core statistical indicators (as of September 14, 2004) — reporting notes
- Key observation dates and frequency for series (examples):
  - Exchange Rates: Date of Latest Observation 9/3/04; Date Received Current 9/10/04; Frequency of Data Daily; Source NBR; Mode of Reporting Facsimile/e-mail; Confidentiality No; Frequency of publication Monthly.
  - International Reserves: Date of Latest Observation 9/3/04; Date Received 9/10/04; Frequency Weekly; Source NBR; Mode Facsimile/missions/e-mail; Confidentiality 4/; Frequency of publication Monthly.
  - Central Bank Balance Sheet: Date of Latest Observation 9/3/04; Date Received 9/10/04; Frequency Weekly; Source NBR; Mode Facsimile/missions/e-mail; Confidentiality 4/; Frequency of publication Monthly.
  - Reserve/Base Money and Broad Money: Date of Latest Observation 6/30/04 and 6/04 respectively; Date Received 8/11/04; Frequency Weekly (Reserve/Base Money) and Monthly (Broad Money); Source NBR; Mode Facsimile/missions/e-mail; Confidentiality 4/ and No; Frequency of publication Monthly.
  - Consumer Price Index: Date of Latest Observation 06/04; Date Received 9/10/04; Frequency Monthly; Source NBR; Mode Facsimile/missions/e-mail; Confidentiality 4/; Frequency of publication Monthly.
  - Exports/Imports: Date of Latest Observation 2003; Date Received 3/04; Frequency Monthly; Source NBR; Frequency of publication Annually.
  - Current Account Balance: Date of Latest Observation 07/04; Date Received 09/04; Frequency Monthly; Source MFEP; Mode Facsimile/missions/e-mail; Confidentiality 4/; Frequency of publication Annually.
  - Overall Government Balance: Date of Latest Observation 2003 1/; Date Received 7/04; Frequency Semi-annually; Source MFEP; Frequency of publication Annually.
  - GDP/GNP: Date of Latest Observation 12/02 1/; Date Received 2/03; Frequency Semi-annually; Source MFEP; Frequency of publication Annually.
  - External Public Debt and Debt Service: Date of Latest Observation 12/03 1/; Date Received 4/04; Frequency Semi-annually; Source MFEP; Frequency of publication Annually.
- Footnotes:
  - 1/ Estimates.
  - 2/ NBR = National Bank of Rwanda.
  - 3/ MFEP = Ministry of Finance and Economic Planning.
  - 4/ Preliminary data for staff use only; actual data are unrestricted.
  - 5/ International Reserves refer to gross official reserve assets.
  - 6/ Overall Government Balance refers to Central Government Balance.
  - 7/ External public debt refers to external public debt owed or guaranteed by the central government, local governments or the National Bank of Rwanda. Normal import-related credits are excluded.

### Medium- to long-term scenarios (2020 targets) — framework and assumptions
- Purpose: assess investment requirements to achieve long-term development objectives and implications for donor assistance and fiscal and external debt sustainability. Each scenario anchored by one explicit target to be reached by 2020:
  - (i) GDP per capita of US$900;
  - (ii) GDP per capita of US$630;
  - (iii) NPV of debt-to-exports ratio of 150 percent.
- Each scenario incorporates three export growth paths: “optimistic,” “base,” and “status quo.”
- Key modelling assumptions:
  - Production function converts public and private investment into output.
  - Labor supply adjusts one-to-one to changes in capital; labor productivity growth matches capital — eliminating labor input from consideration.
  - Private capital mobilization assumed to grow moderately faster than GDP.
  - Population growth slows from 2.7 percent to 2 percent by 2010 and remains at 2 percent until 2020.
  - Incremental capital-output ratio (ICOR) assumed 3.5 (realized ICOR was 4.8 during 2000-03), corresponding to a 29.5 percent rate of return on investment.
  - No change in real exchange rate; values projected in constant 2004 Rwanda francs.
  - In GDP-bound scenarios, public investment increases faster than GDP; in debt-ratio-bound scenario, public investment is capped by borrowing requirement.

### Scenario results — Target: GDP per capita US$900 by 2020 (selected rows)
- Key assumptions:
  - Average population growth (in percent) 2.2  percent
  - Invesment productivity 29 percent
  - Private investment Grows at a fixed rate above real GDP growth
  - Public investment Grows faster than real GDP growth
  - Government borrowing Residual from total resources (revenues and grants) and total expenditures
  - Real exchange rate No change
- Profile (selected years and indicators):
  - GDP real growth rate (in percent): 2005 6.1; 2006 6.4; 2007 6.7; 2010 7.7; 2015 10.1; 2020 13.5
  - Investment (in percent of GDP): 2005 22.3; 2006 23.3; 2007 24.4; 2010 28.3; 2015 37.3; 2020 50.3
    - Of which private: 2005 12.8; 2006 12.9; 2007 13.1; 2010 13.5; 2015 14.3; 2020 15.0
    - Of which public: 2005 9.5; 2006 10.4; 2007 11.4; 2010 14.8; 2015 23.0; 2020 35.3
  - GDP per capita (in U.S. dollars): 2005 207; 2006 221; 2007 237; 2010 301; 2015 487; 2020 901
  - Grants (in millions of U.S. dollars): 177 (2005), 168 (2006), 180 (2007), 180 (2010), 180 (2015), 180 (2020)
  - External public borrowing requirement (in millions of U.S. dollars): 2005 107; 2006 91; 2007 111; 2010 249; 2015 637; 2020 1,755
- Sustainability (selected):
  - Domestic revenue (in percent of GDP): 13.7 (2005), 13.7 (2006), 13.7 (2007), 13.8 (2010), 15.1 (2015), 16.2 (2020)
  - Government expenditures and financial transfers (in percent of GDP): 32.7 (2005), 29.1 (2006), 27.7 (2007), 30.7 (2010), 36.1 (2015), 44.5 (2020)
  - Overall fiscal deficit and arrears clearance (in percent of GDP) including grants: -9.0 (2005), -6.4 (2006), -4.9 (2007), -9.6 (2010), -16.3 (2015), -25.6 (2020)
  - Overall fiscal deficit and arrears clearance (in percent of GDP) excluding grants: -19.0 (2005), -15.4 (2006), -13.9 (2007), -16.9 (2010), -21.0 (2015), -28.3 (2020)
- Debt metrics (NPV and debt service as percent of exports):
  - NPV (in percent of exports)
    - Optimistic: 210 (2005), 216 (2006), 226 (2007), 257 (2010), 447 (2015), 833 (2020)
    - Base: 214, 226, 242, 330, 644, 1,259
    - Status quo: 227, 261, 305, 505, 1,272, 3,169
  - Debt service (in percent of exports)
    - Optimistic: 6.3 (2005), 8.5 (2006), 9.6 (2007), 7.0 (2010), 9.3 (2015), 16.5 (2020)
    - Base: 6.7, 9.2, 10.4, 9.7, 13.6, 25.2
    - Status quo: 8.0, 11.9, 13.4, 15.7, 28.1, 66.5

### Scenario results — Target: GDP per capita US$630 by 2020 (selected rows)
- Key assumptions:
  - Population growth (in percent) 2.2  percent
  - Invesment productivity 29 percent
  - Private investment Grows at a fixed rate above real GDP growth
  - Public investment Grows faster than real GDP growth
  - Government borrowing Residual from total resources (revenues and grants) and total expenditures
  - Real exchange rate No change
- Profile (selected years and indicators):
  - GDP real growth rate (in percent): 2005 6.1; 2006 6.2; 2007 6.2; 2010 6.5; 2015 6.9; 2020 7.4
  - Investment (in percent of GDP): 2005 21.6; 2006 21.9; 2007 22.1; 2010 23.0; 2015 24.5; 2020 26.1
    - Of which private: 2005 12.8; 2006 12.9; 2007 13.1; 2010 13.5; 2015 14.3; 2020 15.1
    - Of which public: 2005 8.8; 2006 8.9; 2007 9.1; 2010 9.5; 2015 10.2; 2020 11.0
  - GDP per capita (in U.S. dollars): 2005 207; 2006 221; 2007 236; 2010 292; 2015 424; 2020 630
  - Grants (in millions of U.S. dollars): 177 (2005), 168 (2006), 180 (2007), 180 (2010), 180 (2015), 180 (2020)
  - External public borrowing requirement (in millions of U.S. dollars): 2005 107; 2006 91; 2007 112; 2010 175; 2015 245; 2020 315
- Sustainability (selected):
  - Domestic revenue (in percent of GDP): 13.7 (2005), 13.7 (2006), 13.7 (2007), 13.8 (2010), 15.1 (2015), 16.2 (2020)
  - Government expenditures and financial transfers (in percent of GDP): 32.7 (2005), 29.1 (2006), 27.8 (2007), 28.1 (2010), 27.4 (2015), 26.0 (2020)
  - Overall fiscal deficit and arrears clearance (in percent of GDP) including grants: -9.0 (2005), -6.4 (2006), -5.0 (2007), -6.8 (2010), -6.9 (2015), -6.0 (2020)
  - Overall fiscal deficit and arrears clearance (in percent of GDP) excluding grants: -19.0 (2005), -15.4 (2006), -14.0 (2007), -14.3 (2010), -12.3 (2015), -9.8 (2020)
- Debt metrics (NPV and debt service as percent of exports):
  - NPV (in percent of exports)
    - Optimistic: 210 (2005), 216 (2006), 226 (2007), 235 (2010), 298 (2015), 346 (2020)
    - Base: 214, 226, 242, 301, 430, 522
    - Status quo: 227, 261, 305, 461, 848, 1,315
  - Debt service (in percent of exports)
    - Optimistic: 6.3 (2005), 8.5 (2006), 9.6 (2007), 6.7 (2010), 7.3 (2015), 9.7 (2020)
    - Base: 6.7, 9.2, 10.4, 9.3, 10.6, 14.7
    - Status quo: 8.0, 11.9, 13.4, 15.0, 22.0, 38.9

*IMF staff report content (2004) derived from the provided IMF document.*

### APPENDIX                                                                        IV

### APPENDIX IV

### Investment, growth, and profile assumptions
- Key assumptions:
  - Population growth (in percent)2.2  percent
  - Invesment productivity 29 percent
  - Private investment Grows at a fixed rate above real GDP growth
  - Public investmentDetermined by borrowing constraint
  - Government borrowingResidual from total resources (revenues and grants) and total expenditures
  - Real exchange rateNo change
  - Derive investment from available resources  debt sustainability (150 percent of  NPV to exports)
- Profile (selected years):
  - GDP real growth rate (in percent): 2005 6.1, 2006 5.3, 2007 6.7, 2010 6.5, 2015 6.2, 2020 6.6
  - Investment (in percent of GDP): 2005 18.4, 2006 23.6, 2007 22.2, 2010 21.2, 2015 21.8, 2020 23.3
    - Of which: private: 2005 12.8, 2006 12.9, 2007 13.1, 2010 13.5, 2015 14.3, 2020 15.1
    - public: 2005 5.6, 2006 10.7, 2007 9.1, 2010 7.7, 2015 7.6, 2020 8.2
  - GDP per capita (in U.S. dollars): 2005 207, 2006 219, 2007 235, 2010 290, 2015 410, 2020 587
  - Grants (in millions of U.S. dollars): 177, 168, 180, 180, 180, 180 (years aligned with profile)
  - External public borrowing requirement (in millions of U.S. d)1079120202020

### Fiscal sustainability and debt indicators (scenario "150 Percent")
- Sustainability (selected indicators):
  - Domestic revenue (in percent of GDP): 13.7, 13.7, 13.7, 13.8, 15.1, 16.2
  - Government expenditures and financial transfers: 30.3, 26.8, 23.3, 22.1, 21.1, 21.4
  - Overall fiscal deficit and arrears clearance (in percent of GDP):
    - including grants: -6.5, -4.1, -0.5, -0.8, -0.4, -1.0
    - excluding grants: -16.6, -13.1, -9.6, -8.3, -6.0, -5.2
- NPV (in percent of exports) under scenarios:
  - Optimistic: 210, 216, 203, 152, 124, 100
  - Base: 214, 226, 218, 195, 178, 151
  - Status quo: 227, 261, 275, 299, 352, 380
- Debt service (in percent of exports) under scenarios:
  - Optimistic: 6.3, 8.5, 9.3, 5.6, 5.0, 4.9
  - Base: 6.7, 9.2, 10.0, 7.8, 7.2, 7.5
  - Status quo: 8.0, 11.9, 13.0, 12.6, 15.0, 19.7

### Millennium Development Goals (selected indicators for Rwanda)
- Eradicate extreme poverty and hunger (2015 target = halve 1990 US$1 a day poverty and malnutrition rates):
  - Prevalence of child malnutrition (percent of children under 5): 1990 29.4, 1995 27.3, 2001 24...
  - Population below minimum level of dietary energy consumption (in percent): 1990 34... 1995 40...
- Achieve universal primary education:
  - Net primary enrollment ratio (percent of relevant age group): 1990 65.9... 2002 97.3...
  - Percentage of cohort reaching grade 5 (in percent): 1990 60... 1995 39.1...
  - Youth literacy rate (in percent ages 15-24): 1990 72.7, 1995 78.6, 2001 84.2, 2002 84.9
- Promote gender equality:
  - Ratio of girls to boys in primary and secondary education (in percent): 1990 97.6... 2002 97.1...
  - Ratio of young literate females to males (in percent, ages 15-24): 1990 86.4, 1995 91.8, 2001 96.3, 2002 96.9
  - Proportion of seats held by women in national parliament (in percent): 1990 17, 1995 17, 2001 26, 2002 26
- Reduce child mortality:
  - Under 5 mortality rate (per 1,000): 1990 178, 1995 210, 2001 183, 2002 191
  - Infant mortality rate (per 1,000 live births): 1990 107, 1995 122, 2001 96, 2002 99
  - Immunization, measles (in percent of children under 12 months): 1990 83, 1995 84, 1999 78...
- Improve maternal health:
  - Maternal mortality ratio (modeled estimate, per 100,000 live births): 1995 2,300...
  - Births attended by skilled health staff (in percent of total): 1990 25.8... 1995 30.8...
- Combat HIV/AIDS, malaria and other diseases:
  - Prevalence of HIV, female (in percent, ages 15-24): 2001 11.2...
  - Contraceptive prevalence rate (percent of women ages 15-49): 1990 21... 2001 13.2...
  - Number of children orphaned by HIV/AIDS: 2001 260,000...
  - Incidence of tuberculosis (per 100,000 people): 2001 404.7...
  - Tuberculosis cases detected under DOTS (in percent): 1995 32, 1999 29...
- Ensure environmental sustainability:
  - Forest area (in percent of total land area): 1990 18.5... 1999 12.4...
  - Nationally protected areas (in percent of total land area): 1995 14.6, 1999 14.7, 2001 14.4, 2002 14.7
  - CO2 emissions (metric tons per capita): 1990 0.1, 1995 0.1, 2001 0.1...
  - Access to an improved water source (percent of population): 2001 41...
  - Access to improved sanitation (percent of population): 2001 8...
- Develop a Global Partnership for Development:
  - Fixed line and mobile telephones (per 1,000 people): 2001 10.9...
  - Personal computers (per 1,000 people): (data not provided)

### External Debt Sustainability Framework — Baseline scenario and projections (selected excerpts)
- External debt (nominal) series (selected years): 1997 61.6, 1998 58.5, 1999 65.8, 2000 40.4, 2001 47.5, 2002 51.3, 2003 55.0
- Change in external debt (selected years): -18.7, -3.1, 7.3, -25.4, 7.1, 3.8, 3.7, 4.2
- Identified net debt-creating flows (selected): -17.0, 0.3, 6.2, 4.8, 4.1, 3.4, 6.5, -1.2
- Noninterest current account deficit (selected years): 8.8, 9.0, 7.2, 4.3, 5.2, 6.0, 7.0, 6.6
- Deficit in balance of goods and services (selected years): 17.9, 17.7, 17.3, 16.3, 15.8, 16.9, 19.3, 19.4
- Exports (in percent of GDP, selected years): 7.8, 5.6, 5.9, 8.3, 9.2, 7.7, 8.3, 9.2
- Imports (in percent of GDP, selected years): 25.7, 23.3, 23.2, 24.6, 25.1, 24.5, 27.6, 28.6
- Net current transfers (negative = inflow): -9.3, -8.4, -10.1, -12.1, -11.3, -11.2, -13.3, -11.3
- Net FDI (negative = inflow): -6.4, -5.2, -3.8, -4.5, -3.9, -2.6, -2.7, -4.5
- Endogenous debt dynamics (selected years): -19.4, -3.5, 2.7, 5.0, 2.9, 0.0, 2.3, -3.0
  - Contribution from nominal interest rate (selected): 0.7, 0.6, 0.5, 0.7, 0.7, 0.8, 0.8, 0.3
  - Contribution from real GDP growth (selected): -8.3, -5.1, -4.6, -4.2, -2.9, -4.4, -0.5, -3.2
  - Contribution from price and exchange rate changes (selected): -11.8, 0.9, 6.8, 8.4, 5.0, 3.6, 2.0, ...
- Residual (3-4) (selected years): -1.7, -3.4, 1.1, -30.2, 3.0, 0.4, -2.8, 5.4
- NPV of external debt (selected projection years): 24.0, 26.2, 27.9, 28.7, 28.9, 28.9, 28.9, 29.4, 22.6
- In percent of exports (NPV, selected): 289.2, 284.2, 300.6, 302.5, 299.5, 295.1, 291.6, 298.2, 229.3
- Debt service-to-exports ratio (in percent, selected years): 25.5, 31.4, 39.7, 26.6, 20.3, 32.4, 30.1, 6.5, 6.7, 9.2, 10.2, 9.7, 9.1, 7.8, 19.5
- Total gross financing need (billions of U.S. dollars, selected): 81.0, 110.4, 110.4, 36.8, 52.5, 102.0, 113.3, 39.6, 15.6, 48.5, 60.4, 75.0, 70.7, 120.4, 250.5
- Noninterest current account deficit that stabilizes debt ratio (selected): 27.6, 12.1, -0.1, 29.7, -2.0, 2.2, 3.2, 1.2, 3.1, 6.4, 8.3, 9.1, 9.0, 11.1, 14.7

### Key macroeconomic assumptions (selected)
- Real GDP growth (in percent): 13.8, 8.9, 7.6, 6.0, 6.7, 9.4, 0.9, 7.6, 3.9, 6.0, 6.0, 6.0, 5.8, 5.6, 5.5, 5.8, 6.0, 6.0, 6.0
- GDP deflator in US dollar terms (change in percent): 17.2, -1.5, -10.4, -11.3, -11.0, -7.1, -3.7, -4.0, 10.1, -3.9, 0.2, 0.0, 1.1, 1.2, 1.2, 0.0, 0.0, 0.0, 0.1
- Effective interest rate (percent): 1.2, 1.1, 0.9, 1.1, 1.7, 1.7, 1.6, 1.3, 0.3, 0.5, 0.6, 0.6, 0.6, 0.6, 0.6, 0.6, 0.6, 1.7, 0.7
- Growth of exports of G&S (US dollar terms, in percent): 72.5, -22.9, 1.9, 32.3, 5.0, -15.6, 5.1, 11.2, 32.3, 13.3, 7.0, 8.4, 8.3, 8.6, 8.1, 9.0, 6.0, 6.0, 6.0
- Growth of imports of G&S (US dollar terms, in percent): 30.8, -2.6, -4.1, -0.4, -3.2, -0.4, 9.1, 4.2, 12.5, 5.7, 8.0, 5.5, 3.6, 3.8, 4.2, 5.1, 6.0, 6.0, 6.0
- Grant element of new public sector borrowing (in percent): 13.3, ... , 56.4, 56.4, 56.6, 56.9, 56.9, 56.9, 56.7, 56.9, 56.9, 56.9

### Sensitivity analyses and stress tests (selected outcomes)
- Table 2 scenarios (NPV of debt-to-GDP ratio, NPV of debt-to-exports ratio, Debt service ratio) present baseline, alternative scenarios (A1, A2) and bound tests (B1–B6) across 2004-24 with projected values showing vulnerabilities under historical-average and stress shocks (numerical table entries preserved in source charts and tables).

### Public Information Notice summary (PIN No. 04/129)
- Date: November 16, 2004
- IMF concluded the Article IV consultation with Rwanda on October 6, 2004.
- Background and findings:
  - Rwanda undertook national regeneration following the 1994 genocide; recovery in primary activities was relatively rapid, while formal sector activity was mixed.
  - By end-2003, neither manufacturing nor commerce had regained their 1993 levels.
  - Political milestones: new constitution adopted May 2003; presidential and legislative elections August–October 2003; trial proceedings for genocide-accused introduced in 2003, with hearings planned for 2004–05; demobilization process ongoing.
  - The implementation of Rwanda’s growth strategy lagged during 2003–04 due to human resource constraints; vulnerability to exogenous shocks was evident in 2003–04.
  - Failed rains in 2003 led to a decline in agricultural output, which accounts for 40 percent of value added, and limited overall real GDP growth for the year to about 0.9 percent.
  - Risk noted that real GDP growth may fall short of target in 2004 as construction activity is slowing and manufacturing activity is contracting due to a drought-related electricity shortage.
  - Revenue-to-GDP ratio rose to 13.5 in 2003 and is on-track to maintain that level in 2004, reflecting income tax reforms that went into effect in 2003.
  - The overall fiscal deficit after grants amounted to 2.5 percent of GDP in 2003 and is programmed to decline modestly in 2004.

*Source: IMF staff simulations and Public Information Notice No. 04/129.*

### 2.2 percent of GDP. Data for the first half of 2004 indicate that the implementation of the 2004

### _cr04382 - 2.2 percent of GDP. Data for the first half of 2004 indicate that the implementation of the 2004

### Macroeconomic performance and outlook
- Real GDP growth:
  - 1999: 7.6
  - 2000: 6.0
  - 2001: 6.7
  - 2002: 9.4
  - 2003: 0.9
  - 2004 Prog.: 6.0
- Key drivers and risks:
  - Agriculture accounts for 40 percent of value added; failed rains in 2003 caused a sharp decline in agricultural output and limited 2003 growth to about 0.9 percent.
  - Manufacturing and commerce had not regained their 1993 levels by end-2003; manufacturing contracted and construction activity slowed in 2004, risking undershooting 2004 growth targets.
  - Human capital constraints and capacity limitations remain severe; economy remains heavily dependent on agriculture and vulnerable to external and climatic shocks.

### Inflation, monetary aggregates, and exchange rate
- Consumer prices (period average):
  - 1999: -2.4
  - 2000: 3.9
  - 2001: 3.4
  - 2002: 2.0
  - 2003: 7.4
  - 2004 Prog.: 6.9
- Monetary aggregates:
  - Net domestic assets: 1999: 10.0; 2000: -6.8; 2001: -2.6; 2002: -6.1; 2003: 14.8; 2004 Prog.: 11.0
  - Money and quasi-money (M2): 1999: 6.5; 2000: 14.3; 2001: 9.2; 2002: 11.4; 2003: 15.2; 2004 Prog.: 11.0
  - Reserve money: 1999: 13.3; 2000: -6.6; 2001: 6.6; 2002: 11.9; 2003: 12.2; 2004 Prog.: 11.6
  - Velocity (ratio of GDP to M2; end-period): 1999: 6.2; 2000: 5.9; 2001: 5.8; 2002: 5.7; 2003: 5.4; 2004 Prog.: 5.4
- Exchange rate and policy:
  - Real effective exchange rate (end-period; depreciation -): 1999: 2.2; 2000: -10.6; 2001: -3.7; 2002: -12.5; 2003: -3.8
  - Directors considered the floating exchange rate regime continues to serve Rwanda well; recent auction rule adjustments welcomed and further steps toward increasing exchange rate flexibility encouraged.

### External sector developments
- Exports (f.o.b, U.S. dollars):
  - 1999: -3.3
  - 2000: 44.7
  - 2001: 4.2
  - 2002: -28.1
  - 2003: -6.3
  - 2004 Prog.: 8.0
- External current account balance (in percent of GDP):
  - Including official transfers: 1999: -7.7; 2000: -5.0; 2001: -5.9; 2002: -6.7; 2003: -7.8; 2004 Prog.: -6.9
  - Excluding official transfers: 1999: -16.9; 2000: -16.5; 2001: -15.9; 2002: -16.6; 2003: -19.2; 2004 Prog.: -21.4
- 2003–2004 dynamics:
  - External current account relative to GDP widened during 2003, before narrowing modestly during the first half of 2004.
  - Moderate improvement in external terms of trade during 2003 (coffee and tea prices rose) was more than offset by a drop in coltan and coffee export volumes.
  - Continued significant depreciation in the real effective exchange rate did little to slow import growth in 2003; external current account deficit before grants increased by 3 percentage points of GDP to 19.2 percent of GDP in 2003.
  - In the first part of 2004, coffee export volumes increased substantially as international market prices recovered.

### Debt sustainability and external financing
- External debt (end of period, percent of GDP):
  - 1999: 68.1
  - 2000: 79.3
  - 2001: 78.4
  - 2002: 80.9
  - 2003: 85.1
  - 2004 Prog.: 86.6
- Debt sustainability observations:
  - Rwanda’s external debt steadied in 2003 as new borrowing, excluding a new government loan guarantee, was limited.
  - Preliminary debt sustainability analysis update indicates Rwanda’s net present value (NPV) of debt-to-exports ratio rose to about 315 percent at end-2003, after enhanced HIPC Initiative relief.
  - Deterioration driven by slower-than-envisaged export growth and discount rate changes.
  - Directors urged authorities to limit further external borrowing and supported that development partners shift support toward grant assistance.
  - Several Directors emphasized the importance of improved macroeconomic performance in 2004 to reach the completion point under the enhanced HIPC Initiative.

### Fiscal policy and public finances
- Overall fiscal balance (payment order, percent of GDP):
  - After grants: 1999: -4.0; 2000: 0.7; 2001: -1.3; 2002: -1.9; 2003: -2.5; 2004 Prog.: -2.2
  - Before grants: 1999: -9.7; 2000: -8.9; 2001: -9.5; 2002: -9.1; 2003: -10.5; 2004 Prog.: -14.8
- Revenue and spending:
  - Revenue collection constrained by limited size of the formal sector; authorities report tax effort has risen to 13.5 percent and are determined to maintain that level in 2004.
  - Directors underscored importance of improving tax efficiency by strengthening tax administration, reforming tax, customs, and investment code legislation, and avoiding new tax exemptions.
  - Directors emphasized need to prioritize budgetary operations, establish spending contingencies, and limit expenditures to sustainable levels.
  - Authorities stated measures to restrain growth in recurrent outlays while accommodating external grant-financed increases in social spending kept overall spending targets on track for the first half of 2004.
  - Concern that scaling up of spending programs could substantially increase the structural deficit if financed by long-term external borrowing.

### Financial sector and structural reforms
- Banking and financial sector:
  - Recent sale of government’s majority shareholdings in two commercial banks welcomed; central bank urged to bring all commercial banks into compliance with banking regulations.
  - Sale of majority shares in BCR and BACAR cited as strengthening sector health and enhancing central bank supervision.
  - Monetary stance: recent slowing of money growth considered appropriate; authorities called to strengthen coordination between the central bank and Treasury to avoid money market instability from programmed spending increases.
- Structural reform agenda:
  - Program set in line with the Poverty Reduction Strategy Paper (PRSP, issued June 2002).
  - Priorities include: update and implement agricultural growth strategy; press ahead with export promotion strategy; improve agricultural productivity; develop new niche products; establish an export processing zone; expand export markets including prospective entry into the East African Community and Southern African Development Community (SADC).
  - Privatization and governance: sale of Pfunda tea estate completed; privatization of Rwandatel and a hotel company to be completed rapidly; civil service reforms nearing implementation; land reform legislation including title transferability under Parliamentary review.
  - Public financial management: new Auditor General Act submitted to Parliament; new organic budget law enacted; finance instructions preparation underway; new tax law drafted and new custom registration submitted to Parliament.
  - Statistical capacity: Directors urged use of technical assistance to address weaknesses in Rwanda’s statistical base, which suffers significant limitations for surveillance purposes.

### Executive Board assessment and recommendations
- Directors’ recognition:
  - Noted substantial strides since 1994 genocide in macroeconomic stabilization, establishment of market elements, and restoration of state institutions.
  - Emphasized that the formal sector remains narrow and economy is extremely vulnerable to external and climatic shocks.
- Policy recommendations and cautions:
  - Implement further economic reforms aimed at faster and sustained growth, poverty reduction, and fiscal and external sustainability.
  - Limit further external borrowing given vulnerability and worsening debt outlook; urge partners to shift toward grant assistance.
  - Improve tax administration and tax policy, avoid new tax exemptions.
  - Prioritize budgetary operations and set spending contingencies.
  - Strengthen coordination between central bank and Treasury, maintain appropriate monetary stance, and increase exchange rate flexibility.
  - Promptly enforce banking regulations and complete bank recapitalization and compliance.
  - Continue progress in governance, public financial management, and statistical capacity building.
- Specific operational notes:
  - Borrowing targets under the PRGF-supported programs have been observed, but reliance on long-term external borrowing to finance higher spending may hinder progressive reduction in imbalances.
  - Directors welcomed initiatives to develop exports, export processing zones, and regional integration prospects (EAC and SADC).

*Source: IMF Public Information Notice and Article IV consultation documents (IMF staff estimates, projections, and Executive Board assessment as presented in the provided content).*

### 13.5 in 2003 and is on-track to maintain that level in 2004, reflecting the impact of income tax

### _cr04382 - 13.5 in 2003 and is on-track to maintain that level in 2004, reflecting the impact of income tax

### Fiscal performance and public finances
- Tax effort rose to 13.5 percent in 2003 and is on-track to maintain that level in 2004, reflecting the impact of income tax reforms that went into effect in 2003.
- Government spending has become increasingly focused on social programs and capital expenditure.
- Overall fiscal deficit after grants:
  - amounted to 2.5 percent of GDP in 2003;
  - is programmed to decline to 2.2 percent of GDP in 2004.
- Revenue collection constraints and policy guidance:
  - Revenue collection constrained by limited size of the formal sector.
  - Authorities committed to avoiding new tax exemptions and to strengthening the revenue authority.
  - Directors urged strengthening tax administration, reforming tax, customs, and investment code legislation, and avoiding new tax exemptions.
- Budget implementation:
  - Data for the first half of 2004 indicate that implementation of the 2004 budget was on track.
  - Directors urged clear prioritization of budgetary operations, establishment of spending contingencies, and limiting expenditure to a sustainable level.
- Risks from scaling up spending:
  - Directors noted that scaling up spending programs under consideration could substantially increase the structural deficit.
  - Most Directors expressed concern that significant further reliance on long-term external borrowing to finance planned higher spending may hinder reduction in imbalances and be imprudent given vulnerability.

### External sector and current account
- External current account dynamics:
  - External current account deficit before grants increased by 3 percentage points of GDP, to 19.2 percent of GDP in 2003.
  - During the first half of 2004 the external current account narrowed modestly.
- Drivers in 2003–2004:
  - Moderate improvement in external terms of trade during 2003 as market prices for coffee and tea rose.
  - This was more than offset by a drop in coltan and coffee export volumes in 2003.
  - Continued significant depreciation in the real effective exchange rate did little to slow import growth during 2003.
  - During the first part of 2004, coffee export volumes increased substantially as international market prices recovered.
- Directors’ views and recommendations:
  - Directors urged limiting further external borrowing and supported shifting donor support toward grant assistance.
  - Several Directors pointed to the importance of improved macroeconomic performance in 2004 to reach the enhanced HIPC Initiative completion point.

### External debt and debt sustainability
- External debt and NPV indicators:
  - External debt (end of period) rose to 85.1 in 2003 and projected 86.6 in 2004 (as presented in the Selected Indicators table).
  - Preliminary estimates based on a debt sustainability analysis update: Rwanda’s net present value (NPV) of debt-to-exports ratio rose to about 315 percent at end-2003, after enhanced HIPC Initiative relief.
- Causes of deterioration:
  - Slower-than-envisaged export growth and discount rate changes led to deterioration in the NPV of debt-to-exports ratio.
- Policy implications:
  - Given the worsened outlook for debt sustainability, Directors urged authorities to limit further external borrowing.
  - Directors supported development partners substantially shifting support toward grant assistance.

### Monetary and exchange rate policy
- Monetary developments:
  - Directors indicated that the recent slowing of money growth is appropriate.
  - There has been a curb in net credit to government and reduction in broad money.
  - Monetary objectives for 2004: contain inflation and build up international reserves.
- Coordination and market stability:
  - Directors called for strengthened coordination between the central bank and Treasury to ensure second-half 2004 spending increases do not generate money market instability.
- Exchange rate regime:
  - Current floating exchange rate regime continues to serve Rwanda well in limiting inflation to moderate levels.
  - Directors welcomed recent adjustment of auction rules and looked forward to further steps toward increasing exchange rate flexibility.

### Structural reforms, financial sector, and governance
- Structural reform agenda:
  - Rwanda’s economic program includes a comprehensive structural reform agenda aligned with the Poverty Reduction Strategy Paper (PRSP) issued June 2002.
  - Objectives: improve economic productivity, governance, efficiency and external sustainability.
- Financial sector actions:
  - Recent sale of government majority shareholdings in two commercial banks was commended.
  - Privatization: sale of Pfunda tea estate completed; privatization of Rwandatel and a hotel company to be completed rapidly.
  - Directors urged the central bank to bring all commercial banks into compliance with banking regulations and noted completion of bank recapitalization plans.
- Public financial management and statistics:
  - Progress in governance and public financial management since 2003 welcomed.
  - Directors urged continued use of technical assistance to address weaknesses in Rwanda’s statistical base for surveillance purposes.
  - New Auditor General Act submitted to Parliament; new organic budget law enacted; preparation of finance instructions underway.
- Agricultural and export strategies:
  - Directors urged updating and implementing the agricultural growth strategy and pressing ahead with the export promotion strategy.
  - Authorities were refining export promotion strategy with World Bank and donors; initiatives include developing niche products, establishing an export processing zone, and expanding export markets via prospective entry into EAC and SADC.
  - Authorities identified constraints to agricultural growth: marketing/distribution of fertilizer, input credit system limitations, limited agricultural extension services, and land tenure issues; land law submitted to Parliament.

### Executive Board Assessment — key judgments
- Recognition of progress and remaining vulnerabilities:
  - Directors noted substantial strides since 1994 in macroeconomic stabilization, market institutions, and state institutions restoration.
  - However, the formal sector remains narrow; economy heavily dependent on agriculture and vulnerable to external and climatic shocks; capacity limitations and human capital constraints severe.
- Priorities emphasized by Directors:
  - Implement further economic reforms for faster sustained growth and poverty reduction while achieving fiscal and external sustainability and stabilizing heavy debt burden.
  - Strengthen regional peace to bolster confidence and encourage private investment.
  - Limit further external borrowing and encourage donor grant financing.
  - Improve tax efficiency and strengthen tax administration; avoid new tax exemptions.
  - Ensure the central bank promptly enforces banking regulations and enhance exchange rate flexibility.

### Selected economic and financial indicators (1999–2004) — key figures preserved exactly as in source
- Real GDP growth: 1999: 7.6; 2000: 6.0; 2001: 6.7; 2002: 9.4; 2003: 0.9; 2004 Prog.: 6.0
- Consumer prices (period average): 1999: -2.4; 2000: 3.9; 2001: 3.4; 2002: 2.0; 2003: 7.4; 2004 Prog.: 6.9
- Export, f.o.b (in U.S. dollars): 1999: -3.3; 2000: 44.7; 2001: 4.2; 2002: -28.1; 2003: -6.3; 2004 Prog.: 8.0
- Real effective exchange rate (end-period; depreciation -): 1999: 2.2; 2000: -10.6; 2001: -3.7; 2002: -12.5; 2003: -3.8; 2004: ...
- Net domestic assets: 1999: 10.0; 2000: -6.8; 2001: -2.6; 2002: -6.1; 2003: 14.8; 2004 Prog.: 11.0
- Money and quasi-money (M2): 1999: 6.5; 2000: 14.3; 2001: 9.2; 2002: 11.4; 2003: 15.2; 2004 Prog.: 11.0
- Reserve money: 1999: 13.3; 2000: -6.6; 2001: 6.6; 2002: 11.9; 2003: 12.2; 2004 Prog.: 11.6
- Velocity (ratio of GDP to M2; end-period): 1999: 6.2; 2000: 5.9; 2001: 5.8; 2002: 5.7; 2003: 5.4; 2004 Prog.: 5.4
- Overall fiscal balance (payment order) After grants: 1999: -4.0; 2000: 0.7; 2001: -1.3; 2002: -1.9; 2003: -2.5; 2004 Prog.: -2.2
- Overall fiscal balance (payment order) Before grants: 1999: -9.7; 2000: -8.9; 2001: -9.5; 2002: -9.1; 2003: -10.5; 2004 Prog.: -14.8
- External current account balance Including official transfers: 1999: -7.7; 2000: -5.0; 2001: -5.9; 2002: -6.7; 2003: -7.8; 2004 Prog.: -6.9
- External current account balance Excluding official transfers: 1999: -16.9; 2000: -16.5; 2001: -15.9; 2002: -16.6; 2003: -19.2; 2004 Prog.: -21.4
- External debt (end of period): 1999: 68.1; 2000: 79.3; 2001: 78.4; 2002: 80.9; 2003: 85.1; 2004 Prog.: 86.6

### Statement by Laurean W. Rutayisire — summary of authorities’ position (October 6, 2004)
- Compliance and policy stance:
  - Authorities report compliance with Article IV obligations and appreciation for Fund support.
  - Trade regime described as open with reduced tariff rates and no non-explicit tariff barriers.
  - Maintain a floating exchange rate regime and measures to ensure financial stability.
- Fiscal and structural commitments:
  - Determined to maintain tax effort at 13.5 percent in 2004 and to avoid new tax exemptions.
  - Committed to restraining recurrent outlays while accommodating external grant-financed social spending.
  - External borrowing held below HIPC decision point projections.
  - Structural measures: privatization of BCR and BACAR, bank recapitalization plans, submission of Auditor General Act to Parliament, enactment of organic budget law, drafting of a new tax law and customs registration submitted to Parliament.
- Economic challenges and priorities:
  - Agriculture identified as central to poverty reduction; 90 percent of population live in rural areas.
  - Authorities request assistance to address statistical base weaknesses and to implement agricultural growth measures (fertilizer distribution, input credit, extension services, land tenure).
  - Authorities recognize need to limit external borrowing and to seek external grant financing to finance priority social spending.
  - Monetary policy aims to contain inflation and build reserves; market-based exchange rate system to be enhanced.
  - External viability to be addressed via articulated export strategy and pursuing benefits of regional integration (EAC and SADC).
- Conclusion:
  - Authorities committed to PRGF Fund-supported program measures to boost growth, diversify the economy, and reduce poverty, and to reaching the enhanced HIPC completion point soon.

*Source: IMF staff report and related statements as presented in the document.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04382.pdf_