IMF Staff Concludes Visit to Rwanda

IMF News, March 22, 2019

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Published: March 22, 2019

Visit summary

IMF staff team led by Laure Redifer visited Kigali during March 11-22, 2019 to hold discussions on a new three-year Policy Coordination Instrument (PCI) and the 2019 Article IV Consultation.
End-of-Mission press release conveys preliminary findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Preliminary agreement reached on policies that could constitute the basis for a new program with the IMF under its new Policy Coordination Instrument, subject to IMF management and Executive Board approval.

Economic performance (findings)

"Rwanda continues to make notable progress in sustaining high and inclusive growth."
Real GDP growth reached 8.6 percent in 2018.
Inflation has remained well below the central bank’s targeted inflation range (2-8%), reflecting ample food supplies and low inflationary pressures.
Fiscal performance for the first half of FY18/19 has been consistent with agreed targets.
In 2018, the Rwandan franc depreciated by 4 percent against the US$.
International reserves rose above 4.5 months of next year’s goods and services import bill.

Growth projections and drivers

"Growth is projected to remain strong in 2019 at 7.8 percent, and over the medium term at around 8 percent."
Growth drivers identified:
- Continued implementation of the National Strategy for Transformation (NST), which has resulted in strong investment inflows, diversified exports, and more resilient agriculture.
- Large investments such as Bugesera airport, Hakan peat plant, and electricity infrastructure.
- Extensive private and government investment in manufacturing, tourism, agriculture, ICT, health and education to transform the economy into higher value-added activities and boost per capita incomes and living standards.

Inflation outlook and risks

"Inflation is expected to remain low in the first half of 2019, picking up in the second half of 2019 for an average of 3.5 percent for the year."
Inflation forecast caveats:
- Depends on the Season A outcome, international prices, and accommodative fiscal and monetary policies.
- "Very low inflation below the BNR’s targeted range, should it continue over an extended period, could undermine the growth contribution of the private sector."
- Over the medium term, inflation is expected to return to around its benchmark of 5 percent.

External sector and reserves

External balances continued to improve in 2018.
International reserves rose above 4.5 months of next year’s goods and services import bill.

Proposed Policy Coordination Instrument (PCI) — objectives and main pillars

Overall objective: support implementation of the National Strategy for Transformation while maintaining macroeconomic stability.
Program would consist of four main pillars:

1. A medium term fiscal path that allows for more spending to reach NST goals while maintaining public debt at a sustainable level. 2. Regaining momentum in mobilizing domestic resources to support development goals, including through broadening the tax base and strengthening tax compliance. 3. Building on efforts to further enhance fiscal transparency. 4. Supporting implementation of the National Bank of Rwanda’s new forward-looking monetary policy operational framework, including through development of financial markets and broader access within the economy to financial resources.

Meetings and acknowledgements

The IMF staff team met with:
- Minister of Finance and Economic Planning, Uzziel Ndagijimana
- Minister of Trade and Industry, Soraya Hakuziyaremye
- Minister of Agriculture and Animal Resources, Gerardine Mukeshimana
- Minister of Infrastructure, Claver Gatete
- Governor of the National Bank of Rwanda, John Rwangombwa
- Other senior government officials, private sector representatives, and development partners.
The team thanks stakeholders for their engagement and candid discussions.

Media contact

PRESS OFFICER: Gediminas Vilkas
Phone: +1 202 623-7100
Email: MEDIA@IMF.org

IMF Staff Concludes Visit to Rwanda — March 22, 2019 — IMF Communications Department