The International Monetary Fund (IMF) and Rwandan authorities have reached staff-level agreement on policies needed to complete the second reviews of Rwanda’s Policy Coordination Instrument and program under the Resilience and Sustainability Facility.
An agreement has also been reached on a new 14-month Stand-by Credit Facility with total access of 125 percent of quota (SDR 200.25 million, or about US$ 262 million) to help mitigate the balance of payment pressures arising from climate-related shocks.
The development follows a visit to Rwanda by IMF team mid-October to discuss the authorities’ policy priorities and progress on reforms within the context of the second reviews of Rwanda’s Policy Coordination Instrument (PCI) and Resilience and Sustainability Facility (RSF).
“Consideration by the Board is tentatively scheduled in December 2023. Upon completion of the review, Rwanda would have access up to about US$ 48.5 million under the RSF and about US$ 87.5 million under the SCF,” said IMF in a statement.
At the conclusion of the visit, International Monetary Fund (IMF) team, led by Ruben Atoyan noted that Rwanda’s policy space to advance developmental objectives is constrained by diminished policy buffers, tight global financing conditions, and the structural decline in external concessional financing.
“Worsening external environment due to global geopolitical tensions and consecutive climate-related shocks have put further strains on international reserves and narrowed policy space. Balance of payments pressures are expected to persist in the coming months amid the high food import bill, while the post-flood reconstruction costs are projected to be substantial, at 3 percent of GDP over the next five years,” noted the IMF team.
The IMF team also noted that despite the challenging environment, macroeconomic policy performance through end-June 2023 remained broadly in line with program objectives under the PCI.
Most quantitative targets were met, and reforms to boost domestic revenue mobilization, advance expenditure rationalization, enhance fiscal transparency, and strengthen foreign exchange market functioning are progressing well.
“Going forward, the mission noted that increasing imbalances require further recalibration of policies to safeguard macroeconomic and external sustainability. Continued fiscal consolidation, proactive and data-driven monetary policy, and further exchange rate adjustment will help rebuild buffers, curb inflation, and improve debt sustainability.”