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IMF Mission Reviews Rwanda’s Economic Reform Program

by Daniel Sabiiti
10:59 am

Rwandan farmers taking agriculture to the next level. Credit: Jean Pierre Mazimpaka/MINAGRI

 An International Monetary Fund (IMF) mission and the Rwandan authorities have reached staff-level agreement on policies needed to complete the first reviews of Rwanda’s Policy Coordination Instrument and program under the Resilience and Sustainability Facility (RSF).

The agreement was reached this April 4, 2023 by the IMF mission, led by Haimanot Teferra after holding meetings with the Rwandan authorities from March 22 – April 4, 2023.

The meetings discussed the first reviews of Rwanda’s Policy Coordination Instrument (PCI) and program under the RSF, and based on the preliminary findings the mission prepared a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

The Executive Board review meeting is tentatively scheduled for May 2023 and upon completion of its approval, Rwanda would have access to SDR 55.46 million (equivalent to about US$ 74.6 million) under the RSF.

“The mission is grateful for the authorities’ excellent cooperation and candid and constructive discussions and reaffirms the IMF’s support for the government’s efforts to implement its economic reform program,” said Teferra in a statement.

The report showed that Rwanda’s economy registered strong growth at 8.2 percent in 2022, while headline inflation remained elevated at 20.8 percent in February and economic activity fueling import demand added to existing pressures on foreign exchange reserves tied to higher commodity prices and the tightening of global financing conditions, and further exacerbated domestic and external imbalances.

“Performance under the program has been strong. All quantitative targets for End-December 2022 have been met and all reform targets under the PCI and reform measures under the RSF envisaged for the first reviews are progressing well and expected to be completed ahead of the Executive Board discussion,” the IMF statement said.

Credit: Jean Pierre Mazimpaka/MINAGRI

The report showed that Rwanda’s economy registered a strong growth (8.2% in 2022) but macroeconomic imbalances have emerged and headline inflation persistently above 20% in recent months and rising food prices will put pressures in the economy considering the core inflation, at 14.4 percent in February.

Also robust import demand coupled with high commodity prices and tightening global financing conditions have weakened Rwanda’s external position.

Despite a faster pace of exchange rate depreciation, external buffers were significantly reduced with foreign reserves declining to 4.1 months of prospective imports at end-2022.

The IMF stated that Rwanda remains vulnerable to the shock-prone external environment, necessitating the urgent need to re-build policy buffers.

The IMF warned that another spike in global energy and fertilizer prices, a steeper decline in trading partners’ growth, or global financial market and geopolitical developments that adversely affect the availability of concessional resources will further strain external buffers and limit the policy space to confront developmental challenges and address climate change.

Credit: Jean Pierre Mazimpaka/MINAGRI

“The authorities (Rwandan) will need to further tighten the fiscal and monetary stance to rebuild policy buffers, IMF said, maintaining fiscal sustainability calls for raising domestic revenues, while containing non-priority current and capital expenditures”.


The report stated that maintaining fiscal sustainability calls for raising domestic revenues, while containing non-priority current and capital expenditures.

This means a timely implementation of the revised excise and corporate income tax laws and plans to step up efforts to develop a medium-term spending rationalization strategy will support the envisaged fiscal consolidation.

Reforms to adopt effective and transparent public financial and investment management practices should accelerate and the institutional capacity to assess and manage SOE fiscal risks needs to be strengthened.

The National Bank of Rwanda should pursue a more decisive monetary policy tightening to contain inflationary pressures and promote exchange rate flexibility to ensure external stability.

It recommended sustained structural reforms to tackle pandemic scarring and enhance socioeconomic resilience and further efforts in enhancing the access to health care and education, addressing learning losses, promoting regional trade integration, and the scaling up and better targeting of social protection.

The Nasho irrigation dam. Credit: Jean Pierre Mazimpaka/MINAGRI

IMF commended Rwanda for the good progress with strengthening their institutional capacity to integrate climate-related considerations in the design of macroeconomic policies and frameworks but asked for continued reforms to allocate climate resources more effectively and transparently to mobilizing additional climate funding and achieving Rwanda’s ambitious climate agenda.

For instance, Green public finance management and climate-specific public investment management reforms will improve the authorities’ decision making and create a conducive environment for attracting climate finance from development partners and from stakeholders looking to support Rwanda’s climate efforts.

Establishing guidelines for financial institutions on climate-related risk management and introducing standards for development of markets for sustainable finance products will also support private green investment.

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