Journal Issue

IMF Executive Board Completes Sixth Review Under Policy Support Instrument for Rwanda and Extends Policy Support Instrument

International Monetary Fund. African Dept.
Published Date:
June 2013
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The Executive Board of the International Monetary Fund (IMF) has completed on June 17, 2013, the sixth review under a three-year Policy Support Instrument (PSI) for Rwanda.1 The Executive Board has also extended the PSI by seven months to end-January 2014. The Executive Board’s decision was taken on a lapse of time basis.2

Economic activity in 2012 was resilient despite lower aid inflows. GDP growth was 8 percent, driven by expansion in the construction and service sectors. Meanwhile, inflation pressures eased as the supply shock of high food and fuel import prices dissipated. Consumer price inflation fell to 3.2 percent in March 2013. Pressures in the foreign exchange market led to some depreciation of the Rwandan franc and a decline in the foreign reserves of the National Bank of Rwanda (NBR) to 3.5 months of prospective imports at end-2012. With the resumption of aid inflows and greater exchange rate flexibility, foreign exchange market pressures have eased significantly in recent weeks. Rwanda successfully launched a US$400-million eurobond in April 2013 to repay less favorable external debt and complete strategic investment projects.

All but two quantitative assessment criteria for the sixth review were met. The end-December 2012 Net Foreign Assets (NFA) target was missed by a small margin reflecting strong market demand for foreign exchange and reduced aid inflows. The continuous ceiling on non-concessional borrowing was breached because the government decided to expand the size of the euro bond by US$50 million to cover the completion cost of a priority hydro-power project. Five of six structural benchmarks were completed. The benchmark on the specification of the technical design of the integrated financial management and information system has been re-phased to September 2013.

Growth is projected to ease modestly in 2013 while inflation is expected to remain contained. Real GDP growth is projected to be 7.5 percent in 2013, and to converge to 7 percent annually over the medium term. Inflation is expected to average 5.6 percent in 2013, rising on the back of the exchange rate pass-through. Risks to the outlook continue to center mainly around budget support, delays in project implementation, and a weaker-than-expected global economic environment.

Economic policies are guided by the twin requirements of adjusting to available resources and preserving policy buffers. The agreed fiscal framework for FY2013/14 is in line with the objectives of the PSI. It sustains efforts on revenue mobilization, aligns spending to available resources, minimizes domestic financing, protects priority spending, and is based on prudent assumptions regarding budget support disbursements. In the face of declining aid, mobilizing additional domestic revenue in the medium-term will be crucial to support the ambitious development agenda of the recently-launched second Economic Development and Poverty Reduction Strategy (EDPRS2). Monetary policy will continue to aim at keeping inflation low, while helping preserve international reserves at prudent levels, including through a flexible exchange rate policy.

The Executive Board approved a three-year PSI for Rwanda on June 16, 2010 (see Press Release No. 10/247).


The IMF’s framework for PSIs is designed for low-income countries that may not need IMF financial assistance, but still seek close cooperation with the IMF in preparation and endorsement of their policy frameworks. PSI-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners. A country’s performance under a PSI is normally reviewed bi-annually.


The Executive Board takes decisions under its lapse of time procedures when it is agreed by the Board that a proposal can be considered without convening formal discussions.

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