News Brief No. 01/101

News Brief: IMF Completes Review Under Rwanda's PRGF Arrangement and Approves US$12 Million Disbursement

October 10, 2001

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Rwanda's third annual arrangement under the Poverty Reduction and Growth Facility (PRGF)¹. As a result, Rwanda will be able to draw up to SDR 9.52 million (about US$12 million) immediately.

The arrangement supporting Rwanda's three-year program, originally under the Enhanced Structural Adjustment Facility (ESAF), was approved on June 24, 1998 (see Press Release 98/24, for SDR 71.4 million (about US$92 million). So far, Rwanda has drawn SDR 52.36 million (about US$67 million) under the arrangement.

After the Executive Board's discussion on Rwanda, Eduardo Aninat, Deputy Managing Director and Acting chairman, stated:

"Under the 2000/01 program, the Rwandan authorities have continued to make progress in strengthening macroeconomic management and structural reforms. This is evidenced by the continued robust economic growth, low inflation, and the buildup of foreign exchange reserves in the context of a stable exchange rate. It will now be important to make a sustained effort in policy implementation and address outstanding vulnerabilities to keep the economy on a stable growth track. Accordingly, the Rwandan authorities have recently taken measures to tighten fiscal and monetary policies consistent with achieving the macroeconomic objectives for 2001 and with gradually reducing fiscal and external current account imbalances over the medium term.

"Fiscal consolidation—in the short and medium term—will be key to attaining the program's macroeconomic objectives, and, for this purpose, raising revenue and improving expenditure management are critical to free resources for poverty reducing programs and development in general. In this regard, the authorities need to expedite revenue-enhancing measures for 2001 and beyond. On expenditure management, the authorities aim to improve the planning and monitoring of the development budget, tighten control over government accounts, tackle the arrears problems, and strengthen control over spending. Military spending is also expected to wind down over time.

"Reining in the high broad money growth is necessary to avoid jeopardizing the stabilization gains of recent years. In this context, the increase of the central bank's rediscount rate in late August 2001 is welcome. There is a need to further strengthen the conduct of monetary policy through enhancing the monitoring of key monetary indicators, and making preemptive and decisive use of monetary policy instruments. The authorities are to be commended for the positive steps taken toward a transparent market determination of the exchange rate through the introduction of a foreign exchange auction. In addition, they are committed to continuing efforts to strengthen bank supervision and implement steps to improve loan recovery.

"The authorities have made progress in improving governance, as evidenced in part by the candid audit reports of four ministries by the Auditor General, which will be made available to parliament and to the public. On the basis of these reports, the authorities have already taken steps to improve transparency and accountability in the public sector.

"The authorities are also to be commended for the implementation of recent civil service reforms. However, there is urgency in accelerating the pace of the privatization program, so as to improve the country's economic efficiency, improve governance, and strengthen public finances.

"The Executive Board supported Rwanda's requests for completing the first review under the third annual arrangement under the PRGF and for waivers for the nonobservance of five performance criteria, in light of progress made in implementing the reform program and recent steps taken by the authorities to ensure that the program's objectives are attainable. The Board also supported the extension of the commitment period of the PRGF arrangement to April 30, 2002, and granted additional interim assistance under the enhanced Heavily Indebted Poor Countries Initiative for this period," Mr. Aninat said.