IMF Executive Board Completes Third SCF and Eighth PSI Reviews for Rwanda, Approves US$25.8 Million Disbursement Under the SCF, and Extends the PSI

IMF News, January 12, 2018

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Published: January 12, 2018

Executive Board actions

The Executive Board approved the extension of the Policy Support Instrument (PSI) for Rwanda to December 1, 2018.
The Executive Board 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).
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 were approved by the Executive Board on June 8, 2016. Both were again extended on November 29, 2017 to January 31, 2018.

Key findings and macroeconomic outlook (statements by Mr. Zhang)

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.
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.
Headline inflation spiked in early 2017 but has declined rapidly as food supplies recovered from the drought; inflation is expected to remain low in the near term but could pick up gradually over the course of 2018 as growth accelerates.
Despite achievements, the Rwandan economy remains vulnerable to external shocks and fiscal risks; it will be important to continue building foreign exchange reserve buffers and to identify and mitigate potential fiscal risks.
The authorities are crafting a revised medium term development strategy with the goal of achieving middle income status by 2035; regaining momentum in mobilizing domestic revenue is important to finance development.

Recent economic developments (highlights)

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.
The current account deficit is expected to improve from 14.9 percent of GDP in 2016 to 8.8 percent in 2017.
Year-on-year consumer price inflation was at 2.3 percent in November, 2017; 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.
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 newer and less costly software).

Program purpose and policy priorities

The PSI and SCF arrangement have supported Rwanda’s efforts to address external imbalances, support continued strong growth, and durable poverty reduction.
The SCF arrangement added a financing component to the existing PSI-supported program aimed to:
- promote private-sector led growth through safeguarding macroeconomic stability, including external sustainability;
- promote fiscal sustainability based on continued improvements in domestic resource collection;
- maintain low and stable inflation; and
- enhance access to credit and deepen the financial sector.

Table 1 — Selected economic indicators, 2016–2019 (selected exact figures)

Real GDP: 2016: 5.9, 2017: 5.2, 2018: 6.5, 2019: 7.5
GDP deflator: 2016: 4.9, 2017: 6.4, 2018: 4.2, 2019: 5.0
CPI (period average): 2016: 5.7, 2017: 5.3, 2018: 4.5
CPI (end of period): 2016: 7.3, 2017: 4.0
Terms of trade (deterioration, -): 2016: 6.3, 2017: 4.6, 2018: -4.7, 2019: 1.2
Broad money (M3): 2016: 7.6, 2017: 14.7, 2018: 14.4
Reserve money: 2016: 5.5, 2017: 12.6, 2018: 11.7
Credit to non-government sector: 2016: 7.8, 2017: 11.0, 2018: 12.9
M3/GDP (percent): 2016: 24.1, 2017: 24.7, 2018: 25.5
NPLs (percent of total gross loans)1: 2016: 8.2
Total revenue and grants (percent of GDP): 2016: 23.7, 2017: 22.7, 2018: 22.6, 2019: 22.1
- of which: tax revenue: 2016: 15.8, 2017: 15.7, 2018: 22.6, 2019: 15.9
- of which: grants: 2016: 5.1, 2017: 22.6, 2018: 4.4, 2019: 4.3
Expenditure (percent of GDP) — Current / Capital: 2016: 27.4 / 15.4 / 10.6; 2017: 28.0 / 15.0 / 10.7; 2018: 27.1 / 14.6 / 10.4; 2019: 26.6 / 9.8
Primary balance: 2016: -2.8, 2017: -4.2, 2018: -3.3
Overall balance excluding grants: 2016: -3.8, 2017: -8.9, 2018: -5.3, 2019: -9.8
Net domestic borrowing: 2016: -4.5, 2017: -4.4, 2018: -8.7
Total public debt incl. guarantees: 2016: 44.5, 2017: 47.6, 2018: 49.2, 2019: 49.8
- Of which: external public debt: 2016: 35.8, 2017: 37.6, 2018: 39.4, 2019: 40.2
Investment: 2016: 26.1, 2017: 25.0, 2018: 26.0, 2019: 23.4
- Government: 2016: 15.5, 2017: 14.3, 2018: 15.6, 2019: 13.6
Savings: 2016: 7.2, 2017: 12.5, 2018: 11.3
Exports (goods and services): 2016: 18.8, 2017: 21.1, 2018: 21.5
Imports (goods and services)2: 2016: 36.8, 2017: 31.8, 2018: 33.1, 2019: 32.8
Current account balance (incl. grants): 2016: -14.9, 2017: -8.8, 2018: -10.0, 2019: (not listed)
Current account balance (excl. grants): 2016: -18.9, 2017: -12.5, 2018: -13.4, 2019: -12.1
Current account balance (excl. large projects): 2016: -10.3, 2017: -8.1, 2018: -7.3, 2019: -6.5
Gross international reserves in millions of U.S.$: 2016: 1,001, 2017: 1,083, 2018: 1,128, 2019: 1,275
Gross international reserves in months of next year’s imports: 2016: 4.1
GDP at current market prices — Rwanda francs (billion): 6,618; 2017: 7,405; 2018: 8,220; 2019: 9,279
GDP at current market prices — US$ (million): 8,406
GDP per capita (US$): 728
Population (million): 11.6, 11.8, 12.1, 12.4

Press Release No. 18/02, January 12, 2018, International Monetary Fund.

IMF Executive Board Completes Third SCF and Eighth PSI Reviews for Rwanda, Approves US$25.8 Million Disbursement Under the SCF, and Extends the PSI

Source details

Other formats

Bibliographic details

Executive Board actions

Key findings and macroeconomic outlook (statements by Mr. Zhang)

Recent economic developments (highlights)

Program purpose and policy priorities

Table 1 — Selected economic indicators, 2016–2019 (selected exact figures)

References