Press Release No. 03/86

Press Release: IMF Completes Review Under Rwanda's PRGF Arrangement and Approves US$810,000 Disbursement

June 16, 2003

The Executive Board of the International Monetary Fund (IMF) has completed the first review of Rwanda's economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. The Board also granted a waiver of performance criteria pertaining to the domestic fiscal balance at end-December 2002 the net accumulation of domestic arrears and the non-accumulation of nonreschedulable external arrears. As a result, Rwanda will be able to draw up to SDR 571,000 (about US$810,000) under the arrangement immediately.

Rwanda's PRGF arrangement was approved on July 24, 2002 (see Press Release No. 02/36), for SDR 4 million (about US$5.6 million). So far, Rwanda has drawn SDR 574,000 (about US$815,000) under the arrangement.

The PRGF is the most concessional facility for low income countries. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal.

In commenting on the Executive Board's discussion on Rwanda, Eduardo Aninat, Deputy Managing Director and Acting Chair, stated:

"Given Rwanda's difficult social conditions, rapid progress in reducing poverty and achieving sustainable economic growth remains critical. Developments during 2002 were encouraging: strong growth in subsistence agriculture delivered substantial relief to Rwanda's poor, inflation was kept at a low level, and large inflows of external assistance helped strengthen the country's official reserves position. This performance reflected both a creditable policy implementation and the impact of favorable climatic conditions. In particular, substantive revenue measures were implemented that constitute an important step toward fiscal sustainability, and meaningful actions were taken to strengthen the administration of the public finances and the banking sector. Rwanda's active contribution to the procurement of peace in the region will be important for securing donor aid and improving the investment climate in the region.

"With a challenging social and political transition now under way, continued implementation of strong policies is needed to maintain macroeconomic stability and to lay the foundations for sustained economic growth and poverty reduction. Monetary policy will aim at keeping inflation low in 2003. Fiscal policy will seek a further strengthening of the government's domestic revenue base, while providing resources to support exceptional operations—including elections and continued demobilization of the military—and priority expenditures in critical social areas.
In addition, the 2003 program envisages additional measures to strengthen public financial administration and to addresses weaknesses in the banking system.

"The continued support of the international community, through technical and financial assistance, will be critical to Rwanda's economic reconstruction. Prudent economic management and satisfactory progress with structural reforms will facilitate such support. Much progress has been made in implementing the structural reform agenda, but progress has been slow in some areas mainly because of capacity constraints. High priority would need to be given to the implementation of the policies set out in the Poverty Reduction Strategy Paper, particularly those for boosting private investment and trade and diversifying the export base of the economy," Mr. Aninat said.