At a previous engagement, Rwanda’s former Central Bank Governor John Rwamgombwa, and Finance Minister Yusuf Murangwa, in a meeting with IMF delegation
Kigali, Rwanda – The International Monetary Fund (IMF) has endorsed Rwanda’s latest tax reform agenda, describing it as a bold and necessary step toward fiscal consolidation, improved equity, and long-term sustainability.
The endorsement follows the conclusion of the IMF Executive Board’s fifth review under the Policy Coordination Instrument (PCI), during which Rwanda was commended for strong program performance and prudent economic management.
At the center of the IMF’s praise is the government’s comprehensive tax overhaul, which was adopted by Parliament in April and signed into law by President Paul Kagame.
The reforms introduce 14 new taxes and adjustments aimed at generating over Rwf 350 billion ($310 million) in additional domestic revenues over the next five years.
The IMF lauded these changes as essential for strengthening fiscal buffers, managing rising public debt—expected to peak in FY2025/26—and financing key infrastructure and social programs.
“The recently adopted tax reform package is a welcome step toward broadening the tax base and enhancing equity and efficiency,” said Bo Li, IMF Deputy Managing Director and Acting Chair. “Rwanda’s continued commitment to fiscal discipline and structural reforms bodes well for sustainable growth.”
Key Measures Affecting Citizens and Businesses
In response to the country’s growing demand for infrastructure development and energy resilience, new levies have been introduced on fuel imports and road usage.
A 15 percent levy on the customs value of petrol and gas oil will support the development of Rwanda’s strategic fuel reserves, while a new annual road levy will see vehicle owners pay between Rwf 50,000 and Rwf 150,000 per year, depending on the type and size of their vehicles. This revenue will be dedicated to road maintenance and rehabilitation.
A sweeping reform of excise duties has also been enacted. Cigarettes will now be taxed at 36 percent of their retail price plus Rwf 230 per pack, while cigars face a steep 160 percent tax.
Electronic cigarettes are taxed at a flat rate of Rwf 30,000 per unit, and their liquid cartridges at Rwf 24,400. Motor lubricants are subject to a 37 percent excise duty. Fuel prices will rise further with an excise tax of Rwf 183 per litre on premium petrol and Rwf 150 per litre on gas oil.
Motor vehicles are now taxed based on both engine size and age, with rates ranging from 5 percent to 15 percent depending on these factors.
To ease the burden on essential services and encourage productivity, the government has expanded the list of VAT-exempt goods and services.
Medical services and pharmaceutical products, sanitary pads, educational materials including online learning tools, books, newspapers, and raw agricultural products are all now exempt from VAT.
In a progressive move toward green growth and industrial support, electric vehicles and their charging infrastructure are VAT-exempt until 2028, while industrial machinery and raw materials will enjoy the same exemption until 2026.
Reform Momentum and IMF Support
Government officials emphasize that the reforms reflect a deliberate strategy to shift taxation toward luxury consumption and environmentally harmful products, while easing pressure on basic services and the productive economy.
The aim, they say, is to create a tax system that is fairer, more efficient, and better aligned with national priorities.
The IMF noted Rwanda’s strong macroeconomic fundamentals, with 2024 GDP growth reaching 8.9%, inflation under control, and continued investment in strategic sectors.
The government was also commended for its progress on state-owned enterprise (SOE) oversight, digitalization of public finance systems, and integration of climate considerations into policy.
While encouraging the government to stay the course, the IMF also urged vigilance in managing fiscal risks, particularly from SOEs and pending pension reforms.
