The Executive Board of the International Monetary Fund (IMF) today approved
the extension of the Policy Support Instrument (PSI)
[1]
for Rwanda to December 1, 2018 and completed the eighth review of Rwanda’s
performance under the PSI and the third and final review of the arrangement
under the Standby Credit Facility (SCF).
[2]
Completion of the third SCF review enables the disbursement of US$
25.8.million (SDR 18. 0225 million), bringing total disbursements under the
arrangement to SDR 144.18 million, about US$206.6million.
Requests for an 18-month SCF arrangement with access of about US$204
million (SDR 144.18 million) or 90 percent of Rwanda’s quota and to extend
Rwanda’s PSI-supported program through end-2017 (see
Press Release No. 16/270) were approved by the Executive Board on June 8, 2016. Both were again
extended on November 29, 2017 to January 31, 2018 (see
Press Release No.17/457).
Following the Executive Board discussion, Mr. Zhang, Deputy Managing
Director and Acting Chair, made the following statement:
“Rwanda has made notable progress in reducing external imbalances which has
helped safeguard macroeconomic stability and improved prospects for long
term growth. Exchange rate adjustment has been the central tool of policy
adjustment, supported by public spending restraint and prudent monetary
policy. Combined with targeted policies to promote domestic production,
these policies have reduced the current account deficit and should place
external balances on a sustainable path over the medium term. Performance
under the SCF arrangement and PSI-supported program has been strong.
“After a slowdown in 2016 and early 2017, growth has started to recover,
led by agriculture and services. Over the course of the next two years,
growth is expected to return to its historical average of 7-7.5 percent,
supported by investments in public infrastructure and interventions
promoting structural transformation and diversified exports. After spiking
in early 2017, headline inflation has declined rapidly as food supplies
have recovered from the drought, and is expected to remain low in the near
term. Inflation could pick up gradually over the course of 2018 as growth
accelerates.
“Despite these achievements, the Rwandan economy remains vulnerable to
external shocks and fiscal risks. It will be important to continue building
foreign exchange reserve buffers to enhance resilience while working to
identify and mitigate potential fiscal risks.
“Building on its notable progress toward development objectives, the
authorities are crafting a revised medium term development strategy with
the goal of achieving middle income status by 2035. To help achieve this
objective, it will be important to regain momentum in mobilizing domestic
revenue as a reliable source of financing for development.”
Recent economic developments
Rwanda’s growth in 2016 and early 2017, while below historical standards,
remained robust relative to the region, with 2017 growth estimated at 5.2
percent. A growth recovery began in Q2 2017 and strengthened in Q3, with
growth expected to revert to historical averages
(7–7.5 percent) over the next two years. The trade deficit continued to
narrow as growth in export volumes outpaced that of imports, partly
reflecting the impact of exchange rate adjustment and structural policies.
As such, the current account deficit is expected to improve from 14.9
percent of GDP in 2016 to 8.8 percent in 2017.
Consumer price inflation has continued to decline since February 2017, with
year-on-year inflation at 2.3 percent in November, 2017, reflecting
improving food supply conditions and declining transport costs. Inflation
is expected to close the year below the central bank’s medium-term target
of 5 percent, but should pick up toward the target as growth accelerates.
In the face of lower inflation and the tapering off of exchange rate
pressure, monetary policy has been relaxed, with the policy rate adjusted
downwards by a cumulative 100 basis points since November 2016. The fiscal
policy stance for FY2018/19 has been slightly relaxed, while maintaining
the medium-term path of adjustment.
Performance under the PSI-supported program and SCF arrangement remained
strong. Most quantitative targets and structural reform benchmarks were
met, except for a target on domestic arrears at end-June 2017 and a planned
measure to roll out a pilot for electronic billing machines. The latter was
intentionally delayed in favor of the use of newer and less costly software
that achieves the same purpose.
Program summary
The existing PSI and SCF arrangement have supported Rwanda’s efforts to
address external imbalances, thereby supporting continued strong growth and
durable poverty reduction. The SCF arrangement added a financing component
to the existing PSI-supported program, which aims to promote private-sector
led growth through safeguarding macroeconomic stability, including through
external sustainability, fiscal sustainability based on continued
improvements in domestic resource collection, low and stable inflation, and
enhancing access to credit and deepening the financial sector.
Table 1. Rwanda: Selected Economic Indicators, 2016 - 2019
|
|
2016
|
2017
|
2018
|
2019
|
|
Output and prices
|
|
|
|
|
|
Real GDP
|
5.9
|
5.2
|
6.5
|
7.5
|
|
GDP deflator
|
4.9
|
6.4
|
4.2
|
5.0
|
|
CPI (period average)
|
5.7
|
5.3
|
4.5
|
5.0
|
|
CPI (end of period)
|
7.3
|
4.0
|
5.0
|
5.0
|
|
Terms of trade (deterioration, -)
|
6.3
|
4.6
|
-4.7
|
1.2
|
|
Money and credit
|
|
|
|
|
|
Broad money (M3)
|
7.6
|
14.7
|
14.4
|
…
|
|
Reserve money
|
5.5
|
12.6
|
11.7
|
…
|
|
Credit to non-government sector
|
7.8
|
11.0
|
12.9
|
…
|
|
M3/GDP (percent)
|
24.1
|
24.7
|
25.5
|
…
|
|
NPLs (percent of total gross loans)1
|
7.6
|
8.2
|
…
|
…
|
|
General government budget
|
|
|
|
|
|
Total revenue and grants
of which
: tax revenue
of which
: grants
|
23.7
15.8
5.1
|
22.7
15.7
4.5
|
22.6
15.7
4.4
|
22.1
15.9
4.3
|
|
Expenditure
Current
Capital
|
27.4
15.4
10.6
|
28.0
15.0
10.7
|
27.1
14.6
10.4
|
26.6
14.7
9.8
|
|
Primary balance
|
-2.8
|
-4.2
|
-3.3
|
-3.3
|
|
Overall balance
excluding grants
|
-3.8
-8.9
|
-5.3
-9.8
|
-4.5
-8.9
|
-4.4
-8.7
|
|
Net domestic borrowing
|
0.8
|
1.2
|
0.8
|
0.9
|
|
Public debt
|
|
|
|
|
|
Total public debt incl. guarantees
|
44.5
|
47.6
|
49.2
|
49.8
|
|
Of which:
external public debt
|
35.8
|
37.6
|
39.4
|
40.2
|
|
Investment and savings
|
|
|
|
|
|
Investment
|
26.1
|
25.0
|
26.0
|
23.4
|
|
Government
|
10.6
|
10.7
|
10.4
|
9.8
|
|
Nongovernment
|
15.5
|
14.3
|
15.6
|
13.6
|
|
Savings
|
7.2
|
12.5
|
12.6
|
11.3
|
|
Government
|
3.1
|
3.2
|
3.6
|
3.2
|
|
Nongovernment
|
4.0
|
9.3
|
9.0
|
8.1
|
|
External sector
|
|
|
|
|
|
Exports (goods and services)
|
18.8
|
21.1
|
21.5
|
22.6
|
|
Imports (goods and services)2
|
36.8
|
31.8
|
33.1
|
32.8
|
|
Current account balance (incl. grants)
|
-14.9
|
-8.8
|
-10.0
|
-8.9
|
|
Current account balance (excl. grants)
|
-18.9
|
-12.5
|
-13.4
|
-12.1
|
|
Current account balance (excl. large projects)
|
-10.3
|
-8.1
|
-7.3
|
-6.5
|
|
Gross international reserves
|
|
|
|
|
|
in millions of U.S.$
|
1,001
|
1,083
|
1,128
|
1,275
|
|
in months of next year’s imports
|
4.2
|
4.1
|
4.0
|
4.3
|
|
Memorandum items:
|
|
|
|
|
|
GDP at current market prices
|
|
|
|
|
|
Rwanda francs (billion)
|
6,618
|
7,405
|
8,220
|
9,279
|
|
US$ (million)
|
8,406
|
…
|
…
|
…
|
|
GDP per capita (US$)
|
728
|
…
|
…
|
…
|
|
Population (million)
|
11.6
|
11.8
|
12.1
|
12.4
|
|
Sources: Rwandan authorities and IMF staff estimates.
1 NPLs to total gross loans for 2017 is at June 2017.
2 imports for 2016 reflect purchases of two aircrafts.
|
[1]
The PSI is an instrument of the IMF designed for countries that do
not need balance of payments financial support. The PSI helps
countries design effective economic programs that, once approved by
the IMF's Executive Board, signal to donors, multilateral
development banks, and markets the Fund's endorsement of a member's
policies (see
http://www.imf.org/external/np/exr/facts/psi.htm
). Details on Rwanda’s current PSI are available at www.imf.org/rwanda.
