Rwanda will get an additional $111.06 funding from the International Monetary Fund (IMF) to support the country’s economic recovery efforts following the impact of the New Coronavirus impact on the economy.
The IMF Executive Board approved $111.06 million on Thursday, a second disbursement under the Rapid Credit Facility (RCF) bringing the total IMF COVID-19 emergency support to Rwanda to US$ 220.46 million to help the urgent balance of payment (BOP) and budget needs stemming from the pandemic.
Rwanda’s economy has been severely impacted by the COVID-19 pandemic with weaker domestic demand losses of revenue, and a sharp decline in exports and remittances following major restrictions which were imposed to contain the spread.
IMF said the additional resources under the RCF will help alleviate pressing financing needs, including for health, social protection, and supporting the most impacted sectors and vulnerable groups.
The disbursement follows the Executive Board’s decision on April 9, 2020 to double the annual access limit under the RCF to 100 percent of quota and brings the total IMF COVID-19 support to Rwanda to $ 220.46 million.
“Rwanda’s economic outlook has worsened since the approval of the first RCF request on April 2, 2020, leading to a further downward revision in the 2020 GDP growth forecast from 5.1 to 2.0 percent due to deepening of the COVID-19 impact,”
“The unprecedented spending needs generated by the pandemic, combined with losses of revenues, are putting significant pressures on public finances and compounding the impact of sharp declines of exports and remittances on the balance of payments,” the IMF said in a statement.
The global financial institution said that the additional disbursement under the RCF will provide much-needed support for critical COVID-related spending under the government’s Economic Recovery Plan, but further support will be needed from the international community.
It said the authorities have committed to transparency and accountability to ensure the appropriate use of emergency financing, building on their strong public financial management framework.
“The COVID-19 pandemic continues to severely impact the Rwandan economy. The global and domestic macroeconomic outlook has further deteriorated. Growth projections have been revised down, and revenue losses and spending needs are more than twice the size estimated at the time of the first RCF request,” said Tao Zhang, the Deputy Managing Director and Acting Chair, following the Executive Board’s discussion.
“The policy measures deployed by the authorities to respond to the pandemic and accelerate economic recovery are appropriate. The additional fiscal spending should help mitigate the impact of the pandemic while ensuring that spending is well-targeted and cost-effective so as not to crowd-out other priority areas,” he added.
Zhang said that additional financing from the international community remains critical to ease the adjustment burden, pointing out that authorities’ commitment to high standards of transparency and accountability in the management of emergency financial assistance is welcome.
“It will also be important to maintain data-driven monetary policy and continue to provide liquidity support to cushion the impact of the pandemic as well as step-up supervision to safeguard financial stability,”
“Once the crisis abates, it will be critical to adopt a credible fiscal adjustment path to maintain debt sustainability in the medium-term and preserve Rwanda’s development gains over the last two decades,” He concluded.