Press Release No. 18/102

IMF Staff Completes Review Mission to Rwanda

March 23, 2018

• The IMF team reached preliminary agreement with the government, subject to approval by IMF management and its Executive Board, on policies that could support the completion of the ninth review of Rwanda’s PSI-supported program.
• Economic growth in 2017 outpaced expectations, rising 6.1 percent, due to a broad-based pick-up in activity in the second half of the year.
• Inflation has remained very low, 0.7 percent in January over the previous year, due to ample food supplies causing food prices to decline.

An International Monetary Fund (IMF) staff team, led by Laure Redifer, visited Kigali from March 14–23, 2018 to conduct discussions on the ninth review of Rwanda’s Policy Support Instrument (PSI) [1] supported program.

Ms. Redifer issued the following statement at the end of the visit:

“The IMF team reached preliminary agreement with the government, subject to approval by IMF management and its Executive Board, on policies that could support the completion of the ninth review of Rwanda’s PSI-supported program. The Executive Board is expected to consider the review in May 2018.

“The IMF staff team observed that Rwanda’s economy is rebounding. Economic growth in 2017 outpaced expectations, rising 6.1 percent, due to a broad-based pick-up in activity in the second half of the year. Meanwhile, inflation has remained very low, 0.7 percent in February over the previous year, due to ample food supplies causing food prices to decline.

“External imbalances have continued to decline, on the basis of exchange rate adjustment and other policies to improve competitiveness and diversify Rwanda’s production and exports. At the same time, foreign exchange reserves are accumulating faster than anticipated, and pressure on the Rwandan franc has abated. Meanwhile, in light of still-low inflation, monetary policy has eased somewhat, to help bolster private sector use of bank credit which increased by just over 13 percent in January over the previous year.

“Looking forward, growth is expected to return to between 7–8 percent in 2018–2019. Inflation should pick up slowly over this period, but stay within the target range of 5 percent. Continued exchange rate flexibility should ensure that Rwanda’s exports remain competitive and the ample availability of foreign exchange in the economy.

“As a result of strong economic growth, tax revenues have increased more than expected: these supplementary resources will be used for additional public spending in priority areas, especially health, education and irrigation for agriculture. While keeping its stance broadly neutral in the near term, the National Bank of Rwanda continues to implement policies to move to a more forward-looking interest rate-based policy framework while carefully monitoring financial sector developments.

“Implementation of Rwanda’s IMF-supported macroeconomic program has remained strong. Most quantitative objectives were met, with many supporting reforms implemented. Going forward, emphasis should be placed on: further boosting the transparency of fiscal operations; identifying potential areas of risk in public operations; and regaining momentum in domestic resource mobilization. As in the past, the IMF team underlined the importance of balancing tax incentives in Rwanda and domestic revenue mobilization objectives. The team welcomed recent passage of the revised Income Tax Law and again urged acceleration of the Fixed Asset Tax law.

“The team - working with the government and other development partners, in particular the United Nations and the World Bank—also examined Rwanda’s strategic sector plans for health, education and infrastructure, which underpin the country’s National Strategy for Transformation Strategy (NST1). These sector plans are aimed to meet the UN Sustainable Development Goals (SDGs) for 2030. A case study will be developed from this information, to be combined with a handful of case studies from low-income countries in other parts of the world, to develop an overview paper on SDG costs and needed financing. It is hoped this overview paper can be presented to the UN General Assembly next fall.

“The IMF team met with Minister of Finance and Economic Planning, Claver Gatete; Governor of the National Bank of Rwanda, John Rwangombwa; Minister of Trade Vincent Munyeshyaka; Minister of Agriculture and Animal Resources, Gerardine Mukeshimana; Minister of Infrastructure, James Musoni, Minister of Health Diane Gashumba, Minister of Education Eugene Mutimura, Head of the Rwanda Mining Board Francis Gatare, and other senior government officials, the Parliamentary Budget Committee, private sector representatives, and development partners. The team thanks all partners for their generous time and candid discussions.”