IMF Executive Board Concludes Reviews, Approves Funding for Rwanda

Looking ahead, Rwanda's policy mix should focus on maintaining macroeconomic and financial stability, ensuring fiscal sustainability, and rebuilding economic buffers.

The Executive Board of the International Monetary Fund (IMF) has concluded its third reviews under the Policy Coordination Instrument (PCI) and the Resilience and Sustainability Facility (RSF), as well as the first review under the Standby Credit Facility (SCF) arrangement with Rwanda. These decisions were taken without a formal meeting. As a result of these reviews, approximately US$ 76.2 million (SDR 57.5 million) under the RSF and US$ 88.4 million (SDR 66.75 million) under the SCF are now available to Rwanda.

Despite challenging external conditions, Rwanda's economy has shown robust growth. In 2023, real GDP growth exceeded expectations, reaching 8.2 percent, driven by the services sector, construction, and recovery in food crop production following floods. Although fiscal consolidation efforts may temporarily slow growth, a rebound to 7.3 percent is projected in the medium term. Inflation has been steadily decreasing since January 2023, reaching 4.2 percent in March due to a decline in food prices and core inflation. While the current account deficit widened more than expected in 2023, international reserves remain sufficient, covering about 4.1 months of imports by the end of the year.

Looking ahead, Rwanda's policy mix should focus on maintaining macroeconomic and financial stability, ensuring fiscal sustainability, and rebuilding economic buffers. A well-planned fiscal approach is essential to address the impacts of the 2023 floods while pursuing balanced fiscal consolidation in the medium term. Monetary policy should aim to keep inflation within the target range and allow for exchange rate flexibility to manage external shocks. Additionally, it is crucial to monitor financial stability risks, especially regarding large exposures and rapid credit growth.

Rwanda's program performance under the PCI and SCF remains strong, with all quantitative targets met. Significant reforms have been implemented, including enhancements to the social safety net and spending rationalization. The RSF measures have also been successful, integrating climate budget tagging, incorporating climate risks into fiscal planning, and strengthening disaster risk management. These efforts have enhanced Rwanda’s resilience to climate shocks and positioned the country as a leader in regional climate initiatives.