Rwanda has received a disbursement of $25.8 million following the IMF review which indicated that the country has registered steady growth in key economic pillars.
The final disbursement was approved by International Monetary Fund’s Executive Committee which also endorsed extension of the eighth Policy Support Instrument (PSI) review.
Under the International Monetary Fund (IMF)’s Policy Support Instrument, Rwanda has been pursuing four pillars: Private sector development, Exports promotion, Domestic resource mobilization, and financial sector development.
In a statement released after the executive board’s decision, the IMF’s Deputy Managing Director and acting chair Tao Zhang said that Rwanda’s Performance under Standby Credit Facility (SCF) arrangement and PSI-supported program has been strong.
Special Credit Facility provides financial assistance to low-income countries with short-term balance of payments needs.
With the PSI approval, Rwanda can easily design effective economic programs that, once approved by the IMF’s Executive Board, can get a positive nod to funding from donors and multilateral development banks.
“The country has made notable progress in reducing external imbalances which has helped safeguard macroeconomic stability and improved prospects for long term growth,” Zhang said.
In June 2016, in the face of external shocks to the economy, according to Claver Gatete, Minister of Finance and Economic Planning, the IMF executive board approved a – 18 months Standby Credit Facility worth $204 million to offset the impact of low commodity prices by boosting Rwanda’s foreign reserves.
Reacting to the adoption of Rwanda’s reviews by the IMF Executive Board, Gatete said: “Government appreciates support of the IMF, as the Special Credit Facility and agreed policies under the PSI have allowed building reserves.”
Over the last 18 months, the government has been implementing policies towards reducing the trade deficit, including greater exchange rate flexibility, public spending restraint, prudent monetary policy and the Made in Rwanda policy to encourage domestic production of certain goods.
According to Central Bank’s key outcomes of the Monetary Policy Committee (MPC) and Financial Stability Committee (FSC) released on December 28 last year, the last 11 months of the year saw the country reduce its trade deficit by 21.1% compared to the same period last year.
The reduction, according to Central Bank Governor John Rwangombwa, was attributed to a significant increase in formal exports value by 53.7% and a decrease in formal imports value by 1.4%.
Meanwhile, IMF commended Rwanda’s economic growth, which it said had grown at a rate of estimated 5.2 percent last year.
PSI was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of shocks or crisis.