IMF Executive Board Completes Tenth PSI Review for Rwanda
IMF News, November 30, 2018
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- Published: November 30, 2018
Overview
- Executive Board completed the tenth and final review of Rwanda’s performance under the Policy Support Instrument (PSI).
- PSI for Rwanda was approved on December 2, 2013, and extended on January 12, 2018, to December 1, 2018.
- Authorities reaffirmed forward-looking policy commitments and are brainstorming with IMF staff on topics of interest for a potential successor program supported by the IMF.
- IMF capacity development underway will continue to support the authorities in key areas for structural reform.
- Notable quoted assessment by Mr. Tao Zhang, Deputy Managing Director and Acting Chair: “Rwanda’s macroeconomic conditions have continued to improve owing to the strong implementation of reforms underlying the authorities’ economic program. Over the past four quarters, economic activity has gained momentum and was broad-based, inflation remains low, and the economy’s resilience to shocks has been boosted.”
Recent Economic Developments
- Real GDP growth averaged 8.6 percent in the first half of 2018 and has been recovering over the past four quarters.
- Rebound was in line with the projected growth rate of 7.2 percent for 2018.
- Growth was robust in most areas, except construction, with pronounced pick-ups in non-traditional exports and services.
- Inflation:
- Remains low and expectations are anchored within a ±3 percentage points range of the medium-term target of 5 percent.
- Central bank policy rate maintained at 5.5 percent so far in 2018, after a cumulative 100 basis point reduction in 2017.
- Money supply growth at 9.6 percent y/y in August.
- Fiscal and external:
- Headline FY17/18 fiscal deficit unchanged from the previous year at 4.6 percent of GDP.
- Primary deficit excluding grants and UN peace keeping operations (PKO) reduced from 8.2 to 8.0 percent of GDP.
- Trade deficit declined by 6 percent from October 2017-September 2018.
- Current account deficit revised modestly upward reflecting updated methodology for estimating travel expenditures.
- Financial sector remains healthy; external balances and reserve buffers continued to improve.
Program Summary and Structural Reforms
- PSI-supported program emphasized four priority areas:
- Maintaining a sustainable fiscal position by enhancing domestic revenue mobilization (DRM) and pursuing public financial management (PFM) reforms.
- Ensuring stable and low inflation by modernizing the monetary policy framework.
- Improving financial inclusion while reducing financial sector vulnerabilities by strengthening financial supervision.
- Preserving external stability, including debt sustainability.
- Progress noted:
- Domestic revenue mobilization, careful spending containment, and strong debt management rendered fiscal and debt positions sustainable while allowing growth-enhancing public investment and social spending.
- Numerous reforms to establish preconditions for a forward-looking monetary policy framework; inflation remained contained.
- Financial sector supervision and stability enhanced.
- Public investment strategy supported higher value-added economic activity and diversified exports, underpinning growth and poverty reduction.
- Remaining priorities for capacity development and reform implementation include:
- Domestic revenue mobilization.
- Transition to interest rate-based monetary policy operational framework.
- Improving coverage, timeliness and transparency of fiscal reporting and monitoring of fiscal risks.
- Harmonizing balance of payments (BOP) and national accounts.
- Strengthening financial sector supervision.
Key Statistics (Table 1: Rwanda: Selected Economic Indicators, 2017-2020)
- Output and prices (annual percentage change unless otherwise indicated):
- Real GDP: 6.1 (2017, 9th PSI Review Act.), 7.2 (2018 Proj.), 7.8 (2019), 8.0 (2020)
- GDP deflator: 7.3 (2017), 3.0 (2018), 4.9 (2019), 5.8 (2020)
- CPI (period average): 4.8 (2017), 2.8 (2018), 5.0 (2019)
- CPI (end period): 0.7 (2017)
- Terms of trade (deterioration, -): 1.8 (2017), -1.1 (2018), -1.7 (2019), 0.3 (2020), 0.1, 0.9 (values listed)
- Money and credit:
- Broad money (M3): 12.3 (2017), 16.5 (2018), 17.8 (2019), 18.8 (2020), 14.8, …, 21.7 (values listed)
- Reserve money: 8.8 (2017), 13.4 (2018), 14.1 (2019), 12.8 (2020), 20.2
- Credit to non-government sector: 13.9 (2017), 15.1 (2018), 11.0 (2019), 15.2 (2020), 14.0, 17.0
- M3/GDP (percent): 23.6 (2017), 24.9 (2018), 25.2 (2019), 26.1 (2020), 25.5, 27.2
- NPLs (percent of total gross loans): 7.6
- General government budget (Percent of GDP, unless otherwise indicated):
- Total revenue and grants: 22.9 (2017), 23.4 (2018), 22.0 (2019), 22.6 (2020), 22.1, 22.7
- of which : tax revenue: 15.5 (2017), 15.8 (2018), 15.6 (2019), 16.0 (2020), 15.9
- of which : grants: 4.7 (2017), 5.1 (2018), 4.0 (2019), 4.5 (2020), 3.9, 4.3
- Expenditure: 27.6 (2017), 27.5 (2018), 29.4 (2019), 26.2 (2020), 26.7, 25.6
- Current: 14.7 (2017), 14.9 (2018), 13.8 (2019), 13.5 (2020)
- Capital: 10.7 (2017), 10.5 (2018), 12.2 (2019), 10.0 (2020), 10.8, 9.8, 10.6
- Primary balance: -3.6 (2017), -3.0 (2018), -4.6 (2019), -3.2 (2020), -3.1, -2.5, -2.4
- Overall balance: -4.7 (2017), -4.1 (2018), -5.8 (2019), -4.2 (2020)
- excluding grants: -9.4 (2017), -9.0 (2018), -10.8 (2019), -8.2 (2020), -8.6, -7.3, -7.7
- Net domestic borrowing: 0.2 (2017), 0.8 (2018), 1.5 (2019), 0.6 (2020), 0.0
- Public debt:
- Total public debt incl. guarantees: 48.3 (2017), 47.1 (2018), 49.0 (2019), 49.7 (2020), 49.5, 47.3, 47.9
- of which : external public debt: 37.5 (2017), 39.2 (2018), 39.9 (2019), 39.7 (2020), 40.1, 38.6, 39.1
- Investment and savings:
- Investment: 25.0 (2017), 25.9 (2018), 26.3 (2019), 26.6 (2020)
- Government / Nongovernment: 12.7, 14.6, 16.1
- Savings: 12.5 (2017), 10.9 (2018), 12.4 (2019), 11.7 (2020), 13.0, 3.4, 3.6, 3.3, 9.0, 7.5, 8.4, 8.7, 10.1 (values listed)
- External sector:
- Exports (goods and services): 22.4 (2017), 23.0 (2018), 22.5 (2019), 24.1 (2020), 23.7, 24.2, 23.9
- Imports (goods and services): 32.3 (2017), 32.9 (2018), 34.4 (2019), 35.3 (2020), 34.9, 35.9, 34.2, 34.6
- Current account balance (incl grants): -6.8 (2017), -8.3 (2018), -8.8 (2019), -10.0 (2020)
- Current account balance (excl grants): -10.9 (2017), -12.4 (2018), -12.6 (2019), -13.9 (2020), -12.1, -13.3, -11.4, -11.9
- Current account balance (excl. large projects): -6.4 (2017), -7.9 (2018), -9.8 (2019), -7.8 (2020), -8.7, -7.2, -8.0
- Gross international reserves (In millions of US$): 1163 (2017), 1240 (2018), 1284 (2019), 1332 (2020), 1319, 1460, 1461
- In months of next year's imports: 4.1
- Memorandum items:
- GDP at current market prices:
- Rwanda francs (billion): 7,597 (2017), 8,388 (2018), 9,486 (2019), 10,839 (2020)
- US$ (million): 9,136; 9136
- GDP per capita (US$): 772
- Population (million): 11.8, 12.1
Policy Messages and Risks
- Continue cementing macroeconomic stability by preserving low inflation and debt sustainability.
- Continue structural reform agenda to encourage more private investment and support achievement of National Strategy for Transformation (NST) and Sustainable Development Goals (SDGs).
- IMF remains committed to help the authorities manage external and structural risks as Rwanda moves toward achieving middle-income status.
Source: IMF Press Release No. 18/446 — “IMF Executive Board Completes Tenth PSI Review for Rwanda”, November 30, 2018.