IMF Executive Board Completes Seventh PSI Review, Second Review Under the Standby Credit Facility, and Concludes 2017 Article IV Consultation with Rwanda
IMF News, July 12, 2017
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- Published: July 12, 2017
Program completion and financing
- Executive Board completed the seventh review of Rwanda’s performance under the Policy Support Instrument (PSI) and the second review of the arrangement under the Standby Credit Facility (SCF).
- Completion of the second SCF review enables disbursement of US$25.06 million (SDR 18.0225 million), bringing total disbursements under the arrangement to SDR 126.16 million, with the remainder tied to the next and final review.
- The Board approved on June 8, 2016 an 18-month SCF arrangement with access of about US$200.49 million (SDR 144.18 million) or 90 percent of Rwanda’s quota and extension of Rwanda’s PSI-supported program through end-2017.
- Rwanda’s PSI-supported program was originally approved on December 2, 2013.
Macroeconomic developments and outlook
- Growth:
- Growth in 2016 was 5.9 percent, down from 2015.
- Growth is expected to recover over 2017-18, owing to good rains and expanding domestic production.
- Inflation:
- Inflation spiked in early 2017 due to a food supply shock, but is now abating.
- External sector:
- Rwanda’s external trade deficit was lower than anticipated in 2016, following a strong pick up in goods and services exports, combined with reduced demand for imports.
- Policy implementation:
- Program implementation has been strong, with almost all targets met.
- Exchange rate flexibility has been the central tool of policy adjustment, supported by structural reforms to bolster domestic production.
- Performance under the SCF arrangement and PSI-supported program has been strong, with almost all program targets and structural measures set through end-March achieved.
Risks, vulnerabilities, and priorities
- Key vulnerabilities highlighted:
- The Rwandan economy remains vulnerable to external shocks.
- Main risks to economic growth: weather shocks affecting agriculture, regional security issues, and unexpected shifts in external development assistance.
- Reserve buffers:
- It will be important to rebuild foreign exchange reserve buffers to enhance resilience to external shocks.
- Fiscal and revenue concerns:
- Authorities should ensure recently-introduced tax incentives to boost domestic production are well-targeted and do not unduly weaken the tax base.
- Directors supported planned tax expenditure analysis to ensure incentives are well-targeted.
- Monetary policy framework:
- Directors supported the authorities’ plan to move to an interest‑rate based monetary policy framework.
- Preconditions recommended include deepening interbank and domestic debt markets and providing clear signals about monetary policy priorities to help anchor inflation expectations.
- Structural and development priorities:
- To reach upper middle income status, it will be important to boost the role of the private sector as the main engine for growth and investment.
- Continue reorienting the economy toward higher value-added activity; bolster gender equality through greater economic inclusion; increase access to affordable financial services; and foster domestic securities markets.
- Emphasized importance of investment in education and vocational training targeted at building skills to meet rapidly evolving labor needs.
Executive Board assessment
- Directors commended Rwanda’s achievements: structural transformation, high and inclusive growth, reduced poverty and gender inequality, and an attractive business environment.
- Directors welcomed decisive steps to address external imbalances and encouraged continued exchange rate flexibility as the main adjustment tool.
- Directors welcomed improved domestic revenue mobilization and encouraged balancing incentives for production with revenue mobilization needs.
- Directors commended progress in improving the business environment and encouraged continued efforts to boost investment.
Key indicators (selected figures from Table 1)
- Real GDP: 2015 = 8.9; 2016 = 5.9; 2017 = 6.2; 2018 = 6.8; 2019 = 7.3
- GDP deflator: 2015 = 0.1; 2016 = 4.9; 2017 = 7.4; 2018 = 5.5; 2019 = 4.6
- CPI (period average): 2015 = 2.5; 2016 = 5.7; 2017 = 7.1; 2018 = 6.0; 2019 = 5.0
- CPI (end of period): 2015 = 4.5; 2016 = 7.0
- Core inflation (period average) (defined as excluding fresh products and energy): 2015 = 2.1; 2016 = 4.1
- Terms of trade (deterioration, -): 2015 = 5.3; 2016 = 6.3; 2017 = 6.1; 2018 = -4.1; 2019 = 3.6
- Broad money growth: 2015 = 21.1; 2016 = 7.6; 2017 = 13.0; 2018 = 13.2
- Reserve money growth: 2015 = 16.2; 2016 = 10.9; 2017 = 11.1
- Credit to non-government sector: 2015 = 30.1; 2016 = 7.8; 2017 = 17.9; 2018 = 14.2
- M3/GDP (percent): 2015 = 24.9; 2016 = 24.1; 2017 = 23.9; 2018 = 24.0
- General government total revenue and grants (percent of GDP): 2015 = 24.7; 2016 = 23.7; 2017 = 22.1; 2018 = 21.9; 2019 = 21.7
- General government expenditure (percent of GDP): 2015 = 29.3; 2016 = 27.4; 2017 = 26.2; 2018 = 25.8; 2019 = 25.6
- Primary balance (percent of GDP): 2015 = -0.3; 2016 = -2.8; 2017 = -2.9; 2018 = -2.7
- Overall balance (percent of GDP): 2015 = -4.6; 2016 = -3.8; 2017 = -3.9
- Net domestic borrowing (percent of GDP): 2015 = 1.1; 2016 = 0.8; 2017 = 0.0; 2018 = 0.2; 2019 = 0.5
- Total public debt incl. guarantees (percent of GDP): 2015 = 36.4; 2016 = 44.5; 2017 = 45.7; 2018 = 47.1; 2019 = 48.7
- External public debt (percent of GDP): 2015 = 27.9; 2016 = 35.8; 2017 = 38.1; 2018 = 40.2; 2019 = 42.1
- Investment (percent of GDP): 2015 = 25.9; 2016 = 24.6; 2017 = 22.6
- Government investment: 2015 = 12.6; 2016 = 10.6; 2017 = 9.4; 2018 = 9.9; 2019 = 9.5
- Nongovernment investment: 2015 = 13.3; 2016 = 15.0; 2017 = 14.6; 2018 = 14.7; 2019 = 13.1
- Savings (percent of GDP) (table entries present multiple numbers): 2015 = 8.0; 2016 = 10.2; 2017 = 9.3; 2018 = 3.5; 2019 = 3.1; additional columns show 3.0, 3.2, 3.9, 6.4 (as listed)
- Exports (goods and services, percent of GDP): 2015 = 18.4; 2016 = 19.0; 2017 = 20.3; 2018 = 20.6
- Imports (goods and services, percent of GDP): 2015 = 35.6; 2016 = 37.0; 2017 = 33.1; 2018 = 34.3; 2019 = 34.2 (note: imports for 2016 reflect purchases of two aircrafts)
- Current account balance (incl. grants, percent of GDP): 2015 = -13.4; 2016 = -14.4; 2017 = -10.2; 2018 = -11.2; 2019 = -9.9
- Current account balance (excl. grants, percent of GDP): 2015 = -17.8; 2016 = -18.5; 2017 = -13.8; 2018 = -14.6; 2019 = -13.3
- Gross international reserves: 2015 = 0.9 (in billions of U.S.$); 2016 = 1.0; 2017 = 1.2
- Reserves in months of next year’s imports: 2015 = 3.7
- GDP at current market prices (Rwanda francs, billion): 2015 = 5,956; 2016 = 6,618; 2017 = 7,548; 2018 = 8,505; 2019 = 9,544
- GDP at current market prices (US$, billion): 2015 = 8.3; 2016 = 8.4
- GDP per capita (US$): 2015 = 732; 2016 = 729
- Population (millions): 2015 = 11.3; 2016 = 11.5; 2017 = 11.8; 2018 = 12.1; 2019 = 12.8
Source: IMF Press Release No. 17/274 (July 12, 2017).