Press Release: IMF Approves Three-Year ESAF Credit for Rwanda

June 24, 1998

The International Monetary Fund (IMF) today approved a three-year loan for Rwanda under the Enhanced Structural Adjustment Facility (ESAF)1 in an amount equivalent to SDR 71.4 million (about US$95 million) in support of the government’s economic program for April 1998 March 2001. The first annual loan, equivalent to SDR 23.8 million (about US$32 million) is available in two equal semiannual installments, the first of which is available immediately.


Since the end of the civil war in 1994, Rwanda has made substantial progress in rebuilding its severely damaged social and economic infrastructure. A large number of internally displaced persons and returning refugees have been resettled, and the country has made progress in rebuilding its capacity for economic management, restoring macroeconomic stability, and initiating key structural reforms. Despite these efforts, the administrative and institutional capacity of the public sector remains weak; security-related outlays absorb a large share of government expenditure, thereby limiting resources for essential services; poverty is widespread; domestic investment and savings are low; and external debt remains a burden.

Notwithstanding these difficulties, Rwanda achieved progress under an IMF staff-monitored program in 1997. Economic activity continued to recover at a strong pace, the underlying rate of inflation remained under control, and official reserves were rebuilt. The improvement in the macroeconomic situation was underpinned by fiscal consolidation and prudent monetary policies, and most quantitative targets were achieved. On the structural front, commendable progress was made in strengthening revenue administration, improving budget and treasury management, strengthening the banking system, and liberalizing the trade regime.

Medium-Term Strategy and the Program for 1998-2001

Over the medium term, the program for 1998/99-2000/01 supported by the ESAF seeks to achieve sustainable high economic growth and poverty reduction. It focuses on fiscal consolidation and prioritization; the enhancement of administrative and institutional capacity; and the acceleration of structural reforms to improve private sector savings, investment, and competitiveness.

The program for 1998/99 seeks to achieve a real GDP growth rate of 7 percent in 1998 and 8 percent in 1999, reduce the end-of-period rate of inflation to 7 percent in 1998 and to 5percent in 1999, and temporarily increase gross official reserves to just over six months of imports during 1998-99. To achieve these objectives, fiscal policy will seek to increase revenues through broadening the tax base, improving tax administration, and introducing a value-added tax (VAT), while further reducing taxes on trade and revenue. Monetary policy will aim at achieving a further reduction in the rate of inflation, with increased reliance on treasury bills for monetary policy operation.

Structural Reforms

Structural reforms during the program period will be deepened and accelerated, and will be supported by efforts to improve governance as well as consolidate national reconciliation and economic security through the reintegration of refugees. The recently established Rwanda Revenue Authority will strengthen tax administration, with special emphasis on collecting taxes from large enterprises, recovering tax arrears, and reducing fraud and exemptions. The authorities intend to proceed promptly with civil service reform and further trade liberalization. The government is strongly committed to divesting all public enterprises between 1998-2001, including key public utilities and coffee and tea enterprises. The government further intends to revise the commercial, labor, and investment codes to promote private investment and exports and to establish a more flexible labor market, with the objective of improving the business regulatory environment.

Addressing Social Needs

The program’s medium-term fiscal framework foresees significant increases in public expenditure on primary health and education. The government will undertake by September 1998 a public expenditure review of the education and health sectors to assess the level, structure, and efficiency of recurrent and capital outlays. Based on the outcome of this review, the social spending targets for 1999 and beyond will be reconsidered at the time of the mid-term review. The fiscal program also incorporates exceptional social expenditure to address the trauma of the war and promote national reconciliation. This expenditure will cover programs for assistance to victims of genocide, demobilization and reintegration of soldiers, educational assistance to returning refugees, and the establishment of governance institutions.

The Challenge Ahead

Even with the doubling of outlays in real terms over the 1998-2001 period, Rwanda’s social expenditure will remain far below the average for sub-Saharan Africa, where many of Rwanda’s social indicators are worse. To ensure sustained human resource development, higher social expenditure will be needed, and increased amounts of concessional external assistance and more flexible donor commitments will be required over the long term.

Rwanda joined the IMF on September 30, 1963. Its quota2 is SDR 59.5 million (about US$79 million). Rwanda’s outstanding use of IMF financing currently totals SDR 29 million (about US$39 million).

Rwanda: Selected Economic Indicators







(Percent change)

Read GDP growth







Consumer Prices (end of period)







(Percent of GDP)

Overall fiscal balance excluding grants (deficit-)







External current account balance excluding official grants (deficit-)







(Months of imports)

Gross foreign exchange reserves







Sources: Rwandese authorities; and IMF staff estimates and projections.

* Estimates.

** Projections.

1 The ESAF is a concessional IMF facility for assisting eligible members undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period.

2 A member’s quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share of the allocation of SDRs.


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