## IMF Staff Completes Review Mission to Rwanda

_IMF News, May 6, 2021_

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**Canonical URL:** [IMF Staff Completes Review Mission to Rwanda](https://www.imf.org/en/news/articles/2021/05/06/pr21123-rwanda-imf-staff-completes-review-mission-to-rwanda)

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## Bibliographic details
- Published: May 6, 2021

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### Mission summary
- IMF mission led by Haimanot Teferra held virtual meetings with Rwandan authorities during March 22 – May 6, 2021 to discuss the fourth review of Rwanda’s Policy Coordination Instrument (PCI)-supported program.
- Staff-level agreement was reached on policies needed to complete the fourth review under the PCI. The successful completion of the review is subject to approval by the IMF Executive Board.
- Consideration by the Board is tentatively scheduled for end-June 2021.
- The authorities have requested a one-year extension of the PCI program.

### Growth and outlook
- Economic activity contracted by 3.4 percent in 2020 due to the COVID-19 pandemic.
- Growth is projected to rebound to 5.1 percent in 2021.
- The rebound is supported by:
  - the national vaccination campaign targeting 60 percent of the population by end-June 2022, and
  - continued government support to hard-hit businesses and vulnerable households.
- Downside risks to growth remain substantial owing to uncertainties about the duration and impact of the pandemic, and the availability of vaccines.

### Fiscal developments and debt outlook
- The fiscal deficit in the first half of FY20/21 was larger than anticipated, owing to:
  - accelerated execution of schools construction, and
  - timing of budget support disbursements,
  despite revenue overperformance.
- The fiscal deficit in the current and next two budget years is projected to widen further owing to increased spending needs to:
  - accommodate the COVID-19 vaccine rollout,
  - hire new teachers to minimize scarring from human capital loss, and
  - provide support to the private sector and state-owned enterprises.
- Public and publicly-guaranteed debt is projected to increase to just over 80 percent of GDP by 2022, from 71.3 percent at end-2020.
- Rwanda’s risk of debt distress is expected to remain moderate, but risks have heightened and buffers to cushion the impact of external shocks have diminished.
- Policy objective: bring debt to the anchor of 65 percent of GDP within a reasonable timeframe through credible revenue and spending measures and a growth-friendly fiscal consolidation once the crisis abates.

### Prices, external sector, and reserves
- Headline inflation reached 2 percent year-on-year in March, mainly driven by the decline in food prices, and is expected to remain subdued in the next quarters.
- The current account deficit widened in 2020.
- Gross international reserves stood at 6 months of prospective imports.

### Financial sector and banking system
- The banking system continues to be stable, liquid, and well capitalized.
- The pandemic has contributed to the buildup of credit risk.
- Recommendations to contain financial sector vulnerabilities include intensified monitoring of credit risk and prudent loan classification and provisioning.

### Program performance and reform priorities
- Program performance has been strong: all end-December 2020 quantitative targets met and all except one reform targets observed.
- Structural reforms need to be fast-tracked to mitigate risks exacerbated by the pandemic. Key reform areas include:
  - strengthen fiscal risk management to foster inclusive growth and mitigate debt-related risks,
  - bolster domestic revenue mobilization under Rwanda’s Medium-Term Revenue Strategy,
  - rationalize spending and ensure the quality of public investment,
  - strengthen management of fiscal risks, including from state-owned enterprises, public-private partnerships, and government loan guarantees,
  - deepen financial markets, sustain the expansion of digital payments, and further financial inclusion to fast-track private sector development.

### Policy recommendations and balance
- Strike a balance between sustaining the economic recovery and maintaining fiscal responsibility given:
  - the deteriorated fiscal and debt outlook,
  - uncertainty about the pace of the recovery, and
  - Rwanda’s history of frequent macroeconomic shocks.
- Support the recovery with policy action now, to be complemented by growth-friendly fiscal consolidation and credible revenue and spending measures once the crisis abates.
- Allow sufficient time to identify fiscal measures; authorities requested a one-year PCI extension to facilitate this.

*IMF Staff Completes Review Mission to Rwanda, May 6, 2021.*

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## References

- [Rwanda and the IMF](http://www.imf.org/external/country/RWA/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [No. 19/258](https://www.imf.org/en/News/Articles/2019/06/29/pr19258-rwanda-imf-executive-board-concludes-2019-article-iv-consultation-request-three-year-pci)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/05/06/pr21123-rwanda-imf-staff-completes-review-mission-to-rwanda_