IMF Staff Completes Review Mission to Rwanda

IMF News, October 2, 2018

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IMF staff reached preliminary agreement with the government on policies to support completion of the tenth and final review of Rwanda’s PSI-supported program, subject to approval by IMF management and its Executive Board.
The Executive Board is expected to consider the review in November 2018.
The current PSI-supported program expires on December 1, 2018.
The intention is to initiate successor program negotiations in early 2019.
IMF staff visit: from September 20 to October 2, 2018 (team led by Emre Alper and Laure Redifer).

Real GDP growth:
- 6.1 percent in 2017.
- Averaged 8.6 percent in the first half of 2018.
- Projected end-year growth rate of 7.2 percent in 2018.
Inflation:
- Projected to average around 2.8 percent in 2018.
- Inflation expectations remain close to the medium-term inflation target.
Drivers:
- Robust growth in 2018 reflects strong industrial activity, notably construction.
- Favorable food price developments contributed to low inflation.

Central bank maintained the policy rate at 5.5 percent through 2018.
The central bank kept the monetary policy stance unchanged in September.
Projected balance of payments surplus expected to support central bank reserve accumulation.

Fiscal outturn in FY17/18 remained broadly in line with the revised budget.
Higher capital spending was financed through drawdown of deposits of official development assistance accumulated in previous years.
Capital projects cited include improvements to rural road access and vocational training aligned with the National Strategy for Transformation.
Fiscal restraint on recurrent spending and a robust revenue outturn helped contain the deficit.
Reforms:
- Domestic resource mobilization and public financial management reforms have made Rwanda’s fiscal position more sustainable while scaling up social spending.

Trade performance to August 2018:
- Export growth of 17.9 percent in the year to August 2018.
- Import growth of 7.4 percent in the year to August 2018.
Trade balance continued to improve, though:
- Construction of Bugesera airport and a pickup in foreign-financed investment are expected to fuel imports, notably of capital goods, leading to a rise in the trade deficit in 2018.
Capital flows:
- Project disbursements and robust foreign direct investment are expected to maintain the balance of payments in surplus.

Authorities have undertaken policies to improve competitiveness, diversify production, promote exports, and contain imports.
Reforms highlighted:
- Reforms to the monetary policy framework and in the financial system have helped to contain inflation while deepening financial markets.
- Greater exchange rate flexibility and other structural reforms have made Rwanda more resilient to external shocks and enhanced competitiveness.
Sectoral support:
- Continued diversification of the export base and extensive irrigation programs expected to support more resilient agriculture.
- Public investment spending intended to crowd in private sector investment.

Implementation of Rwanda’s PSI-supported macroeconomic program has been strong.
All quantitative targets for the tenth and last review were met.
Structural benchmarks are expected to be completed.
The PSI-supported program has been successful in supporting Rwanda’s overarching objective of sustaining inclusive growth and poverty reduction.

Source: Press Release No. 18/372, IMF Staff Completes Review Mission to Rwanda, October 2, 2018.