IMF Staff Reaches Staff-Level Agreement with Rwanda for a RST Program, with an PCI

F.P. Report

Washington, DC: An International Monetary Fund (IMF) mission, led by Haimanot Teferra, held meetings with the Rwandan authorities in Kigali during September 26 – October 7, 2022, to discuss the authorities’ request for support under the Resilience and Sustainability Facility (RSF) and an accompanying new 36-months Policy Coordination Instrument (PCI). At the conclusion of the mission, Ms. Teferra issued the following statement:

“The Rwandan authorities and an IMF staff team reached a staff-level agreement on policies and reforms under a new 36-month Policy Coordination Instrument and Resilience and Sustainability Facility, with a requested access of 150 percent of quota (SDR 240.3 million). The PCI would support the authorities in their efforts to build on the progress in macroeconomic, fiscal, and financial reforms started under the PCI that was approved in 2019. The RSF financing will help the authorities advance their efforts in building resilience against climate change. The agreement is subject to approval by the IMF Management and Executive Board. Consideration by the Board is tentatively scheduled for December 2022.

“The Rwandan economy has been staging robust growth despite the unfavorable global environment. Staff estimates GDP growth at 6.8 percent in 2022. Elevated global commodity prices and subdued domestic food production have pushed up inflation to 15.9 percent in August, prompting the central bank to raise the policy rate by 100 bps to 6 percent. Fiscal performance for FY21/22 was in line with expectations. The financial system continues to be sound, liquid and well capitalized. The exchange rate has remained stable while reserves stood comfortably above 4 months of prospective imports.

“Looking ahead, addressing high inflation, long-term development needs, and emerging climate risks, remain a policy challenge in a highly volatile global environment. Sustaining the economy’s recovery will require a focus on policies to safeguard debt sustainability, increase fiscal and financial resilience to adverse shocks, as well as reforms to mitigate pandemic scarring and raise productivity growth.

“Rwanda remains vulnerable to shocks and the uncertain external outlook. High global energy and food prices will continue to fuel domestic inflation and weaken the external position. Lower availability of concessional resources and increased needs for social protection will put pressure on the fiscal balance and limit policy space to confront development needs and address climate change.

“ Discussions on reform priorities under the PCI focused on strengthening the fiscal framework, sustaining the implementation of a credible and effective forward-looking monetary framework, and mitigating pandemic scars, while building resilience against future shocks. The authorities would need to maintain macroeconomic stability and reinforce their policy frameworks, while pushing ahead with structural reforms to deliver more inclusive, resilient, and sustainable growth.

“The RSF-supported reforms will help the authorities to advance measures to integrate climate-related considerations in the design of macroeconomic policies and frameworks, enhance climate-related risk management for financial institutions, and strengthen the disaster risk reduction and management framework. While Rwanda has a well-advanced climate strategy, it needs to further strengthen its institutions to deliver and monitor its ambitious climate objectives and to mobilize additional resources.

“The staff team 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.”