Press Release No. 24/469

IMF Executive Board Concludes the Fourth Reviews under the Policy Coordination Instrument and the Resilience and Sustainability Facility, and the Second Review under the Stand-by Credit Facility for Rwanda

December 13, 2024

• The IMF Executive Board today concluded the fourth review under the Policy Coordination Instrument (PCI), the fourth and final review of the arrangement under the Resilience and Sustainability Facility (RSF), and the second and final review under the Standby Credit Facility (SCF). This allows for an immediate disbursement of about US$ 94.23 million (SDR 71.87636 million) under the RSF and US$ 87.51 million (SDR 66.75 million) under the SCF.
• Notwithstanding the challenging policy environment, Rwanda’s economic growth continues to be among the strongest in the Sub-Saharan African region, but fiscal and external vulnerabilities remain high. To facilitate adjustment and rebuild policy buffers fiscal consolidation needs to accelerate, with a stronger focus on domestic revenue mobilization.
• Program performance under the PCI/SCF has been strong, with successful reforms enhancing public investment transparency and FX market functioning. The RSF has been successfully completed ahead of schedule, with all reform measures implemented six months early. Rwanda continues to lead in climate initiatives, driving institutional reforms and innovative climate finance mobilization.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the fourth reviews under the Policy Coordination Instrument and the arrangement Under the Resilience and Sustainability Facility, and second review under the Standby Credit Facility arrangement for Rwanda.^[1] With the completion of these reviews, about US$ 94.23 million (SDR 71.87636 million) under the RSF and US$ 87.51 million (SDR 66.75 million) under the SCF become available.

Despite a challenging external environment, Rwanda's economy has maintained robust growth, driven by strong performance of the services and construction sectors, and a recovery in food crop production. While fiscal consolidation may moderately dampen the near-term growth, a rebound is anticipated in the medium term. Since the beginning of the year, inflation has stabilized at around 5 percent, the mid-point of the central bank’s target range, owing to appropriately tight monetary policy and favorable developments in food prices. The current account deficit widened more than expected in 2024 due to strong capital goods imports, but international reserves are projected to remain adequate at about 4.5 months of imports at end-2024, including RSF disbursements.

To ensure Rwanda's economic stability and growth, policies should focus on maintaining macroeconomic and financial stability, ensuring fiscal sustainability, and rebuilding policy buffers. Accelerating domestic revenue mobilization will be critical to restore Rwanda’s policy space for responding to shocks and achieving its development objectives. Continued progress on expenditure rationalization and mitigating fiscal risks from SOEs is also needed. Monetary policy should aim to control inflation and maintain exchange rate flexibility to handle external shocks. Additionally, vigilant oversight of financial stability, especially regarding large exposures and rapid credit growth, is crucial.

Program performance remains strong with these reviews concluding the SCF and RSF arrangements. Under the PCI/SCF, all quantitative targets/performance criteria were met, and reforms that enhance the transparency of public investments and strengthen FX market functioning were implemented. With the completion of the RSF, the authorities have made significant progress in integrating climate considerations into their macroeconomic policies, establishing frameworks to address investors’ concerns regarding developing innovative financing instruments that can make climate resources affordable. Together with the implemented institutional reforms, development of a strong green project pipeline will help catalyze additional climate financing, enhancing the RSF’s impact.

At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:

“Rwanda’s economy has shown resilience, supported by robust growth in key sectors and a recovery in agricultural production. Inflation has remained stable within the central bank’s target range, reflecting effective monetary policy actions. However, the economy continues to face external vulnerabilities, including a widening current account deficit and exchange rate pressures. The recent Marburg virus outbreak highlighted Rwanda’s health vulnerabilities but also its swift and effective response.

“Fiscal consolidation remains essential to preserving macroeconomic stability and rebuilding buffers. Efforts to enhance domestic revenue mobilization should focus on broadening the tax base, streamlining exemptions, and improving compliance. Rationalizing expenditures and increasing the efficiency of public investments are also important for creating fiscal space while addressing fiscal risks, particularly from state-owned enterprises.

“Monetary and financial policies remain focused on maintaining stability. The forward-looking and data-driven monetary policy framework needs to keep inflation within the target range, while greater exchange rate flexibility is critical for managing external shocks and supporting the current account adjustment. Strengthened oversight, enhanced risk monitoring, and additional capital buffers are necessary to mitigate financial sector vulnerabilities, including large exposures and rapid credit growth, and to safeguard financial stability.

“Rwanda is advancing structural reforms focused on macroeconomic stability, as well as fiscal and monetary policies. Recent reforms to enhance the transparency of public investments and strengthen the functioning of the foreign exchange market mark notable progress. Looking ahead, priorities include domestic revenue mobilization, improved governance of state-owned enterprises, public finance management digitization, and further strengthening monetary policy operations and central bank independence.

“Rwanda has made significant progress in integrating climate considerations into its macroeconomic policies. The early completion of reforms under the RSF reflects strong climate agenda ownership, which is crucial for ongoing efforts to mobilize climate financing. These reforms are enhancing the country’s capacity to address climate-related challenges while creating opportunities for sustainable investment. Continued collaboration with development partners will be key to advancing Rwanda’s climate goals.”

[1] The PCI and RSF arrangement were approved on December 12, 2022, the latter with a total amount of SDR 240.3 million (about US$ 321.66 million or 150 percent of quota), and the second reviews were completed on December 14, 2023. A 14-month SCF amounting to US$ 268.05 (SDR 200.25 million) was approved on December 14, 2023.