IMF Executive Board Completes Third Review Under the Policy Coordination Instrument (PCI) for Rwanda
IMF News, December 16, 2020
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- Published: December 16, 2020
Overview and Program Context
- The Executive Board concluded the third review of Rwanda’s program supported by the IMF’s Policy Consultation Instrument (PCI) on December 16, 2020.
- The PCI program was approved on June 28, 2019 to support the implementation of Rwanda’s National Strategy for Transformation (NST).
- The PCI expires in June 2022 and remains appropriate to balance sustaining the economic recovery and maintaining fiscal responsibility.
Economic outlook and recent performance
- Real GDP contracted by 4.4 percent year-on-year in the first half of 2020.
- Real GDP is projected to be slightly negative at -0.2 percent in 2020 and rebound to 5.7 percent in 2021.
- Recovery momentum followed the end of the full lockdown in the second half of 2020.
- Headline projections and selected price indicators from Table 1:
- Real GDP: 2019: 8.5; 2020: -0.2; 2021: 5.7; 2022: 6.8; 2023: 7.5.
- GDP deflator: 2019: 1.8; 2020: 5.6; 2021: 1.0; 2022: 2.3; 2023: 4.3.
- CPI (period average): 2019: 2.4; 2020: 5.4; 2021: 6.9; 2022: 2.5; 2023: 4.1.
Policy response to COVID-19 and fiscal outcomes
- Authorities adopted early stringent containment measures and implemented a large policy package to support households, businesses, healthcare spending, and banking system liquidity.
- Fiscal impacts and projections:
- Fiscal deficit is expected at 8.5 percent of GDP in FY2020/21.
- Public debt projected at 67 percent of GDP at end-2020 (statement in text).
- Fiscal aggregates from Table 1 (selected):
- Total revenue and grants: 2019: 23.6; 2020: 20.1; 2021: 20.6; 2022: 23.2; 2023: 23.8; 2024: 23.9; 2025: 23.3.
- Of which: tax revenue: 2019: 16.6; 2020: 16.9; 2021: 16.5; 2022: 15.6; 2023: 15.9.
- Expenditure: 2019: 31.9; 2020: 29.0; 2021: 31.7; 2022: 27.2; 2023: 30.2; 2024: 28.3.
- Current expenditure: 2019: 14.5; 2020: 14.6; 2021: 15.8; 2022: 13.9; 2023: 13.4.
- Capital expenditure: 2019: 12.7; 2020: 12.9; 2021: 11.9; 2022: 10.9.
- Primary balance: 2019: -6.9; 2020: -4.2; 2021: -9.9; 2022: -6.0; 2023: -5.2; 2024: -3.0; 2025: -2.0.
- Overall balance: 2019: -12.7; 2020: -10.0; 2021: -16.2; 2022: -13.5; 2023: -10.2; 2024: -12.2; 2025: -11.5.
Debt dynamics and risks
- Public debt and related indicators from Table 1:
- Total public debt incl. guarantees: 2019: 59.0; 2020: 58.1; 2021: 68.1; 2022: 75.7; 2023: 71.1; 2024: 76.3; 2025: 73.7.
- Of which: external public debt: 2019: 46.0; 2020: 45.4; 2021: 55.0; 2022: 61.9; 2023: 58.4; 2024: 63.0; 2025: 60.7.
- PV of total public debt incl. guarantees: 2019: 44.5; 2020: 43.1; 2021: 45.5; 2022: 52.5; 2023: 48.8; 2024: 50.6; 2025: 50.9.
- The Executive Board and staff highlighted the critical need to monitor and contain fiscal risks including from state-owned enterprises and state-guaranteed loans.
Monetary and financial sector conditions
- Monetary policy stance and financial measures:
- Monetary policy has been accommodative.
- Temporary extraordinary measures provided liquidity to the banking sector.
- Emphasis on data-driven monetary policy going forward and close monitoring of credit and liquidity risks, including from loan restructuring, to safeguard financial stability.
- Selected monetary and credit indicators from Table 1:
- Broad money (M3) growth rates: 2019: 21.8; 2020: 21.9; 2021: 11.3; 2022: 22.3; 2023: 12.0; 2024: 16.1; 2025: 13.6.
- Reserve money: 2019: 21.5; 2020: 22.1; 2021: 12.1; 2022: 21.4; 2023: 11.2; 2024: 20.3; 2025: 19.8.
- Credit to non-government sector: 2019: 17.6; 2020: 14.8; 2021: 14.1; 2022: 10.3; 2023: 11.4; 2024: 14.0; 2025: 13.7.
- M3/GDP (percent): 2019: 27.9; 2020: 29.8; 2021: 27.0; 2022: 28.9; 2023: 28.0; 2024: 29.6; 2025: 28.5.
External sector and reserves
- External sector indicators from Table 1:
- Exports (goods and services): 2019: 13.1; 2020: 21.2; 2021: 26.8; 2022: 27.7.
- Imports (goods and services): 2019: 34.9; 2020: 34.1; 2021: 34.4; 2022: 33.8.
- Current account balance (incl grants): 2019: -12.4; 2020: -10.5; 2021: -11.4; 2022: -8.4.
- Gross international reserves (In millions of US$): 2019: 1,367; 2020: 1,553; 2021: 1,643; 2022: 1,461; 2023: 1,463; 2024: 1,598; 2025: 1,556; 2024/alternate: 1,834 (table entries reflect multiple year columns).
Structural reforms and medium-term priorities
- Immediate policy priorities have shifted toward crisis response, but the PCI’s objectives remain focused on:
- Accelerating transition to private sector-led growth in the post-pandemic period given limited fiscal space.
- Continuing structural reforms to promote private sector-led and inclusive growth.
- Strengthening governance, fiscal transparency, and risk management.
- Improving tax compliance.
- Further strengthening the interest rate-based monetary policy framework.
- The crisis has affected progress on structural reforms; renewed efforts to push ahead with reforms are recommended.
Executive Board / Staff recommendations and guidance
- Key recommendations and guidance from Mr. Tao Zhang (Deputy Managing Director and Acting Chair):
- Ensure strong reporting and procurement practices to guarantee effectiveness and oversight of crisis-related spending.
- Pursue sound contingency planning and fiscal risk management given the uncertain outlook.
- To preserve fiscal space, reprioritize spending and seek additional concessional financing should the outlook deteriorate further.
- Closely monitor fiscal risks from state-owned enterprises and state-guaranteed loans.
- Keep monetary policy data driven and monitor credit and liquidity risks, including from loan restructuring.
- Adopt a credible and growth-friendly fiscal consolidation strategy after the crisis abates to preserve debt sustainability while supporting the nascent recovery.
- The strategy should center on measures to re-ignite domestic revenue mobilization, streamline non-priority spending, and re-prioritize public investment.
- Such measures could be announced and legislated before the end of the program to support their credibility.
Source: IMF Press Release No. 20/376, “IMF Executive Board Completes Third Review Under the Policy Coordination Instrument (PCI) for Rwanda,” December 16, 2020.
