Press Release: IMF Executive Board Approves US$204 Million Stand-by Credit Facility for Rwanda and Completes Fifth PSI Review
IMF News, June 8, 2016
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- Published: June 8, 2016
Executive Board action and financing
- On June 8, 2016, the Executive Board completed the fifth review of Rwanda’s economic performance under the Policy Support Instrument (PSI) and approved an 18-month arrangement under the Standby Credit Facility (SCF) for SDR 144.18 million (about US$204 million or 90 percent of Rwanda’s quota).
- The Board granted a waiver for a minor and temporary nonobservance of an assessment criteria on the non-accumulation of external arrears.
- The Board approved the extension of the current PSI up to the end of 2017.
- The SCF will provide a first disbursement of SDR 72.09 million (about US$102 million) available immediately to boost reserves and address growing external imbalances.
Policy context and Executive Board statement
- The SCF complements PSI policies to support growth, poverty reduction, and resilience to global uncertainties by boosting reserves and supporting near- and medium-term adjustment policies to place Rwanda’s external position on a sustainable basis.
- Mr. Min Zhu, Deputy Managing Director and Acting Chair, noted:
- Rwanda’s continued strong performance under the PSI has created a platform for high growth and steady poverty reduction.
- Growth in 2015 was buoyed by strong construction and services activity, while inflation remained contained.
- External shocks—commodity prices, tighter private inflows, and U.S. dollar appreciation—reduced export receipts and put downward pressure on the exchange rate and official reserves.
- Authorities are using continued exchange rate flexibility as the principal adjustment tool, supported by tighter fiscal and monetary policies to curb import demand.
- Implementation of these policies should maintain GDP growth of around 6 percent in both 2016 and 2017.
- Authorities are accelerating policies to diversify and promote higher value exports to strengthen medium-term growth prospects and resilience.
- Downside risks remain, including further shocks to commodity prices or regional and weather-related developments, which would require rapid additional adjustment policies.
Recent economic developments (Annex)
- Growth and external sector
- Real GDP in 2015: 6.9 percent.
- Mining exports dropped by almost half in 2015, causing a significant loss in foreign exchange earnings.
- Current account deficit worsened from 16.4 percent in 2014 to 18.1 percent in 2015.
- Growth outlook for 2016–17 has become more uncertain.
- Inflation and monetary policy
- Consumer price inflation averaged 2.5 percent in 2015; it increased in the second half of 2015 due to higher food prices and administrative utility price increases.
- Monetary policy remained largely accommodative through end-2015 but was tightened in the first quarter of 2016.
- Fiscal and structural performance
- Macroeconomic policy performance through December 2015 remained in line with PSI objectives; most targets were met.
- Structural reforms advanced: measures to boost domestic revenue collection, reduce liquidity overhangs, strengthen financial market supervision and functioning, and improve domestic revenue collection.
- Planned measures to revise the property tax law and improve timeliness of public reporting on budget execution are taking longer than anticipated.
Program purpose and priorities
- The existing PSI and new SCF arrangement aim to address growing external imbalances, support continued strong growth, and sustain durable poverty reduction.
- The SCF adds a financing component to the PSI-supported program, which seeks to:
- Promote private-sector led growth while safeguarding macroeconomic stability.
- Ensure external sustainability.
- Support fiscal sustainability through continued improvements in domestic resource collection.
- Maintain low and stable inflation.
- Enhance access to credit and deepen the financial sector.
Rwanda: Selected Economic Indicators, 2014–2018 (selected series and values as reported)
- Output, prices, and exchange rate
- Real GDP: 2014 Act.: 7.0; 2015 Est.: 6.9; 2016 Proj.: 6.0
- GDP deflator: 2014 Act.: 3.7; 2015 Est.: 1.2; 2016 Proj.: 4.4; 2017 Proj.: 4.6; 2018 Proj.: 4.8
- CPI (period average): 2014 Act.: 1.8; 2015 Est.: 2.5; 2016 Proj.: 4.9; 2017 Proj.: 5.0; 2018 Proj.: 4.7
- CPI (end of period): 2014 Act.: 2.1; 2015 Est.: 4.5; 2016 Proj.: 4.7
- Core inflation (end of period)1: 2014 Act.: 2.9
- Terms of trade (deterioration, -): 2014 Act.: 1.9; 2015 Est.: 2.2; 2016 Proj.: -1.1; 2017 Proj.: -0.9; 2018 Proj.: -0.7
- Money and credit
- Broad money (M3): 2014 Act.: 19.0; 2015 Est.: 21.1; 2016 Proj.: 15.4; 2017 Proj.: 15.6; 2018 Proj.: 15.1
- Credit to non-government sector: 2014 Act.: 19.6; 2015 Est.: 26.8; 2016 Proj.: 16.0; 2017 Proj.: 19.5
- Policy Rate (end of period): 2014 Act.: 6.5
- M3/GDP (percent): 2014 Act.: 22.7; 2015 Est.: 25.4; 2016 Proj.: 26.5; 2017 Proj.: 27.6; 2018 Proj.: 28.3
- General government budget
- Revenue and grants: 2014 Act.: 24.0; 2015 Est.: 25.0; 2016 Proj.: 23.8; 2017 Proj.: 23.3; 2018 Proj.: 23.5
- of which: tax revenue: 2014 Act.: 15.0; 2015 Est.: 15.9; 2016 Proj.: 16.1; 2017 Proj.: 16.3
- of which: grants: 2014 Act.: 7.4; 2015 Est.: 6.4; 2016 Proj.: 5.6; 2017 Proj.: 5.2
- Expenditure: 2014 Act.: 28.1
- Current: 2014 Act.: 14.8; 2015 Est.: 14.3; 2016 Proj.: 14.1; 2017 Proj.: 14.1
- Capital: 2014 Act.: 12.6; 2015 Est.: 13.3; 2016 Proj.: 12.5; 2017 Proj.: 10.2; 2018 Proj.: 10.9
- Primary balance: 2014 Act.: -4.2; 2015 Est.: -4.1; 2016 Proj.: -3.8; 2017 Proj.: -2.4; 2018 Proj.: -2.0
- Overall balance: 2014 Act.: -4.9; 2015 Est.: -5.0; 2016 Proj.: -4.7; 2017 Proj.: -3.3; 2018 Proj.: -3.0
- Public debt
- Total public debt: 2014 Act.: 29.3; 2015 Est.: 35.4; 2016 Proj.: 44.5; 2017 Proj.: 48.5; 2018 Proj.: 49.4
- of which: external public debt: 2014 Act.: 23.6; 2015 Est.: 28.5; 2016 Proj.: 37.5; 2017 Proj.: 41.4; 2018 Proj.: 44.4
- Investment and savings
- Investment: 2014 Act.: 25.2; 2015 Est.: 25.7; 2016 Proj.: 28.9; 2017 Proj.: 25.6
- Public investment: 2014 Act.: 12.4; 2015 Est.: 16.4; 2016 Proj.: 15.2; 2017 Proj.: 14.7
- Savings2: 2014 Act.: 8.9; 2015 Est.: 7.6; 2016 Proj.: 7.7; 2017 Proj.: 9.2; 2018 Proj.: 11.5
- External sector
- Exports (goods and services): 2014 Act.: 16.9; 2015 Est.: 17.3; 2016 Proj.: 16.7; 2017 Proj.: 17.6; 2018 Proj.: 18.4
- Imports (goods and services)3: 2014 Act.: 33.5; 2015 Est.: 34.9; 2016 Proj.: 37.3; 2017 Proj.: 33.3; 2018 Proj.: 32.2
- Current account balance (including grants): 2014 Act.: -10.5; 2015 Est.: -13.5; 2016 Proj.: -16.5; 2017 Proj.: -12.0; 2018 Proj.: -10.2
- Current account balance (excluding grants): 2014 Act.: -16.4; 2015 Est.: -18.1; 2016 Proj.: -21.2; 2017 Proj.: -16.1; 2018 Proj.: -14.1
- Gross international reserves (In billions of US$): 2014 Act.: 1.0; 2015 Est.: 0.9; 2016 Proj.: 0.8; 2017 Proj.: 0.6; 2018 Proj.: 0.7
- Gross international reserves (In months of next year's imports): 2014 Act.: 4.2; 2015 Est.: 3.6; 2016 Proj.: 3.2
- Memorandum items
- GDP at current market prices (Rwanda francs (billion)): 2014 Act.: 5,394; 2015 Est.: 5,837; 2016 Proj.: 6,459; 2017 Proj.: 7,164; 2018 Proj.: 8,031
- GDP at current market prices (US$ (billion)): 2014 Act.: 7.9; 2015 Est.: 8.1
- GDP per capita (US$): 2014 Act.: 719; 2015 Est.: 718
- Population (million): 2014 Act.: 11.0; 2015 Est.: 11.3; 2016 Proj.: 11.8; 2017 Proj.: 12.1
Source: IMF Press Release No. 16/270 (June 8, 2016).