IMF Staff Completes Virtual Review Mission to Rwanda

IMF News, October 26, 2020

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IMF mission led by Haimanot Teferra held virtual meetings with the Rwandan authorities during October 5 – 23, 2020 to discuss the third review under the Policy Coordination Instrument (PCI).
Staff-level agreement was reached on policies needed to complete the third review under the PCI.
The successful completion of the review is subject to approval by the IMF Executive Board; consideration by the Board is tentatively scheduled for mid-December 2020.

Real GDP growth is projected to contract to -0.2 percent in 2020 and rebound to 5.7 percent in 2021.
After a sharp contraction in the second quarter of 2020 due to the COVID-19 pandemic and containment measures, economic activity has started to recover, though downside risks are high.
Inflation remained high, partly reflecting supply disruptions, and is expected to stay closer to the upper bound of the National Bank of Rwanda inflation benchmark band in 2020.
The banking system has remained stable, liquid and well capitalized.

Program performance has been affected by the pandemic; spending needs and revenue losses caused deviations from earlier fiscal targets under the program.
Tax revenues have been stronger than expected at the time of the second IMF emergency financing under the Rapid Credit Facility (RCF), but expenditures are also expected to be higher due to extended fiscal measures and fast-tracked public investment execution.
The overall fiscal deficit is projected to be 8.5 percent of GDP in FY20/21.
Public debt is projected at 67 percent of GDP at end-2020.
The mission and authorities agreed the fiscal stance for FY20/21 and FY21/22 must balance sustaining the economic recovery and maintaining fiscal responsibility.
The fiscal path in the post-COVID period should bring debt level to 65 percent of GDP within a reasonable timeframe.

Outlook remains highly uncertain at the global level due to the unpredictable course of the pandemic and related economic disruptions in Rwanda and trading partners.
Fiscal risks, including from public corporations, public-private partnerships, and loan guarantees provided by the government, need to be monitored and managed closely.
Any support to affected entities should be provided transparently through the budget.

Implementation of structural reforms was partly hampered by the pandemic and needs to be fast-tracked after some delays.
Ongoing efforts to strengthen domestic revenue mobilization, fiscal transparency, and the monitoring and management of fiscal risks need to be stepped up.
Medium-term priorities to create conditions for faster private sector growth include promoting regional integration to increase market size.

IMF Press Release No. 20/320, October 26, 2020.