Rwanda: 2006 Article IV Consultation, First Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for Waiver of Nonobservance of Performance Criteria—Informational Annex

The 2006 Article IV Consultation on Rwanda highlights medium-term stimulating growth to reduce poverty. The government of Rwanda’s medium-term policies address the country’s challenges to increase growth and make headway toward the Millennium Development Goals. Executive Directors commended Rwanda’s sound macroeconomic management and progress on structural reforms and social reconstruction. Together with debt relief, this has led to macroeconomic stability, strong economic growth, and progress in advancing toward the Millennium Development Goals. Directors emphasized the need for increased training to build expertise and overcome capacity constraints in the public sector.


The 2006 Article IV Consultation on Rwanda highlights medium-term stimulating growth to reduce poverty. The government of Rwanda’s medium-term policies address the country’s challenges to increase growth and make headway toward the Millennium Development Goals. Executive Directors commended Rwanda’s sound macroeconomic management and progress on structural reforms and social reconstruction. Together with debt relief, this has led to macroeconomic stability, strong economic growth, and progress in advancing toward the Millennium Development Goals. Directors emphasized the need for increased training to build expertise and overcome capacity constraints in the public sector.

I. Rwanda: Relations with the Fund

(As of November 30, 2006)

I. Membership Status: Joined: September 30, 1963

Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Payments to the Fund (SDR million; based on existing use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative:

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VIII Implementation of MDRI Assistance

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Decision point—point at which the IMF and the World Bank determine whether a country qualifies for assistance under the HIPC Initiative and decide on the amount of assistance to be committed.

Interim assistance—amount disbursed to a country during the period between decision and completion points, up to 20 percent annually and 60 percent in total of the assistance committed at the decision point (or 25 percent and 75 percent, respectively, in exceptional circumstances).

Completion point—point at which a country receives the remaining balance of its assistance committed at the decision point, together with an additional disbursement of interest income as defined in footnote 3 above. The timing of the completion point is linked to the implementation of pre-agreed key structural reforms (i.e., floating completion point).

IX. Safeguards Assessments:

Under the Fund’s safeguards assessment policy, the National Bank of Rwanda is subject to an update of the 2003 assessment. The previous assessment concluded that substantial risks existed in the bank’s safeguards framework, and recommendations made to address the main vulnerabilities have since been implemented.

X. Exchange System:

The Rwanda franc was pegged to the SDR until March 6, 1995, when Rwanda adopted a market-determined exchange rate system. The exchange rate has in fact behaved like a conventional fixed peg for more than a year. On December 1998, Rwanda accepted the obligations under Article VIII, Sections 2, 3 and 4 of the IMF, and maintains a system free of restrictions on the making of payments and transfers for current international transactions. In 2001, a foreign exchange auction system was put in place with technical assistance from MFD. Since February 7, 2001, auctions have been taking place on a weekly basis. The exchange rate regime is currently classified as a managed float, and the foreign exchange auctions impose a limit of +/− RF 5 to the margin by which the exchange rate can vary from the previous day.

XI. Article IV Consultation:

Rwanda is on the revised 24-month consultation cycle. The Executive Board discussed the staff report for the 2004 Article IV consultation (Country Report No. 04/382) on October 6, 2004.

XII. FSAP Participation, ROSCs, and OFC Assessments:

A Report on Observance of Standards and Codes on Fiscal Transparency (ROSC) was issued in July 2003. A Financial Sector Assessment Program (FSAP) has taken place in February 2005. Rwanda has not had an Offshore Financial Center (OFC) assessment.

XIII. Technical Assistance:

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XIV. Resident Representative:

Mr. Lars Holger Engström assumed his duties as Resident Representative in February 2005.

II. Rwanda: Relations with the World Bank Group

(As of November 2006)

Partnership for Rwanda’s Development Strategy

Donor agencies have been key players in Rwanda since the genocide. With the support from the international community, Rwanda has made notable progress along an ambitious path of reconstruction, national reconciliation, and economic reform. In recent years, the Government has made some ambitious efforts, based on its Poverty Reduction Strategy Paper (PRSP), to reduce poverty and improve living conditions of the poor. The PRSP was completed in June 2002. This strategy was supported and discussed by the Boards of the IDA and the IMF on August 12, 2002. The PRSP targeted the halving of poverty by 2015 through a private sector and rural sector strategy. The strategy mainly focuses on six priority areas: (1) rural development and agricultural transformation; (2) human development; (3) economic infrastructure; (4) good governance; (5) private sector development; and (6) institutional capacity building—as the focus for public actions on poverty reduction. Civil society, government agencies and ministries, and donors have all been actively involved in the PRSP process and monitoring. The first PRSP progress report was issued in July 2003 and a Bank-Fund JSA produced in May 2004. The second PRSP progress report was issued in December 2004 and a Bank-Fund JSA was produced in March 2005. The third progress report of the PRSP was issued in July 2005, and the corresponding Bank-Fund JSAN was produced in March 2006.

World Bank Group Program and Portfolio

The last Country Assistance Strategy for Rwanda was discussed by the World Bank Board in December 2002. The current CAS, in support of the first PRSP, will soon come to an end, and has been extended through the preparation of an Interim Strategy Note (ISN) which was approved by the Board in September 2007. The ISN ensures that the next CAS, to be prepared jointly with DFID, is aligned with the second PRSP. Both the CAS and ISN set out an assistance program consistent with the country’s PRSP and emphasize the need to move progressively from project-based approaches to budget support. In line with this approach, a Poverty Reduction Strategy Credit (PRSC) went to the Board in October 2004. This credit would help strengthen GoR capacity to (i) plan and budget results-oriented public sector actions supporting the implementation of the Poverty Reduction Strategy; (ii) develop incentive frameworks through performance-based payments and contracting; (iii) establish strong accountability mechanisms enhancing the capacity of Rwandan citizens to monitor and provide feedback to service providers—both public and private; and (iv) implement a sound fiduciary framework, as well as a monitoring and evaluation system to facilitate transparency and accountability in service delivery for the sectors of focus (i.e., health, education, water, energy). A second programmatic operation, Poverty Reduction Support Grant (PRSG), went to the Board in October 2005 and focused on (i) creating a favorable private sector investment climate that would promote sustained economic growth; (ii) improving quality, coverage, and equity of basic service delivery; and (iii) improving public expenditure management and governance. A third PRSG will continue with the same areas of focus and is expected to go to the Board in December 2006.

International Development Agency (IDA) Program: Since 1970, Rwanda has received 84 IDA credits and grants totaling US$1,458.6 million. As of mid-November 2006, the active portfolio comprised twelve operations with a total net commitment value of US$300 million, of which $124 million remains undisbursed.

Overall, IDA has financed projects in (i) infrastructure, particularly road construction and maintenance, electricity and water supply, and sanitation infrastructure; (ii) agriculture, rural development, and forestry; (iii) social infrastructure, including health and population, and education and training; (iv) private sector development, public enterprise reform, financial development, and technical assistance; and (v) two policy-based quick-disbursing operations (IRC and PRSC1). During the immediate post-genocide period, IDA financed two emergency budget support operations and a social fund-type project, and restructured its prewar portfolio of investment projects to meet the high-priority needs associated with the emergency and the transition from conflict to development.

International Finance Corporation (IFC) Program: The IFC has made some investments in Rwanda, in various industries. Investments have been made in the Rwandan match factory (SORWAL). In FY1998, IFC approved a US$0.53 million investment in Highland Flowers and in FY2000, a US$6.0 million in RWANDACELL. In December 2000, an investment of US$0.8 million was approved for an apartment hotel in Kigali. As of today, these investments with the exception of SORWAL have been cancelled. The IFC has provided some technical assistance support to Rwanda focusing on privatization, SMEs, the financial and industrial sectors. Section B below “Statement of IFC Investments in Rwanda” outlines new investments being considered by IFC.

Multilateral Investment Guarantee Agency (MIGA) Program: Rwanda signed and ratified the MIGA Convention on October 27, 1989. On September 27, 2002, it became a full member of MIGA with the completion of its membership requirements, including payment of the usable currency and the local currency portions of its initial subscription, and deposit of the promissory note. The membership was followed by Rwanda’s election to MIGA’s Board of Directors during the World Bank/IMF annual meetings held in Washington.

Rwanda is one of the 16 post-conflict countries in the region on which MIGA is focusing as part of its post-conflict strategy. To date, there have been no requests for guarantees coverage of projects in the country, and thus the Agency’s efforts have focused on complementing the Bank Group’s strategy of accelerating private sector-led growth in the country. In consultation with the Bank, MIGA’s technical assistance team undertook an assessment to assist Rwanda in creating a national investment and trade promotion capability and made recommendations on the proposed Rwanda Investment Authority, as well as on the medium to long-term prospects for the country to attract foreign investment. Previously, MIGA collaborated with the World Bank to advise on the establishment of the Rwanda Investment and Export Promotion Agency (RIEPA) and provided considerable information on investment prospects in the country.

In addition, MIGA’s on-line investment promotion services ( and feature approximately 90 documents on investment opportunities and the related business, legal and regulatory environment in Rwanda.

World Bank staff

Questions may be referred to Pedro Alba (Tel. 202-458-2246) and Kene Ezemenari (Tel. 202-458-5559).

Table 1.

Summary of Bank-Fund Collaboration

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Table 2.

Status of Active Operations

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III. Statement of IFC Investments in Rwanda

With the aim of creating further investment opportunities in the Great Lakes Region and to allow the countries to benefit from economies of scale, the IFC is taking a regional approach while at the same time exploring investment opportunities. Operations under consideration are the following:

Infrastructure-Energy: IFC is exploring the possibility of participating in the financing of Kibuye Power Ltd (a Lake Kivu Methane Gas Project) under concession to Dane Associates with Wartsila as a technical partner. Project cost is estimated at US$72 million and IFC may invest up to US$18 million in the project.

Infrastructure-Logistics: M/s Intraspeed SA Rwanda Ltd (ISARL) is a major freight and forwarding company operating in the Great Lakes Region of Eastern Africa. The company is involved in bulk haulage of containerized general cargo and liquid cargo from the major ports of Mombasa, Dar-salaam, Tanga, and Mtwara to Kenya, Mozambique and the land locked destination countries of Uganda, Rwanda, DR Congo, Tanzania, Burundi, Zambia and Malawi. IFC approved an investment of up to US$7.5 million on November 10, 2006 to assist the upgrade and expansion of ISARL’s freight hauling capabilities.

Financial Sector: Rwanda completed the privatization of its financial sector, with the sale of the controlling shares in the Banque Commerciale du Rwanda (BCR) to the UK-based Actis Group and the Banque Continental African (BACAR) to Kenya-based FINA Bank. IFC is exploring opportunities for long term credit lines and trade finance facilities to these banks to improve access to MSME finance. IFC approved a trade finance line of up to US$2 million for BCR. In the near term, there will be a strong role for IFC in the financial sector, in helping the development of the sector.

Tourism sector: Rwanda is developing a cluster of good quality hotels and may require IFC assistance for long term financing. IFC will consider post privatization financing of the new investors buying Hotel Intercontinental in Kigali and the Kivu Sun in Kibuye. IFC will also consider financing the rehabilitation and refurbishment of Hotel Milles de Collines.

In addition, IFC advisory and technical assistance role is expected to continue to center on the promotion of the private sector, including, the establishment of a sound enabling environment and the development of the financial sector. In this respect, IFC is implementing a leasing development program in Rwanda. Initial support consists of: (i) assisting with the review of the leasing code completed in October 2005; and (ii) contributing to a leasing financing feasibility study. Based on the outcome of the feasibility study, IFC PEP Africa has started a longer-term leasing development program with an office in Rwanda, comparable to the one currently underway in Tanzania. Also, the IFC has obtained a mandate to provide advisory services to the Government of Rwanda on the privatization of Rwanda Air.

The IFC proposes to develop entrepreneurship in Rwanda. The program would address the needs of existing SMEs to expand their businesses, but also the needs of potential entrepreneurs. Working with institutions such as the private sector federation and business schools, the program proposes to: build capacity for business service providers; support vocational business skills development; and build capacity for entrepreneurship development and training in business schools and private sector institutions. The IFC would approach interested donors for joint support of these activities, and it is expected that the program would be in place during the first semester of calendar year 2007.

III. Rwanda: Statistical Issues

Although economic data are generally adequate for surveillance, weaknesses hamper economic analysis. National accounts and price statistics, government finance, and balance of payments statistics continue to suffer from significant weaknesses. Monetary statistics and data relevant for banking supervision are adequate for surveillance and program monitoring, but scope for improvements in quality and timeliness remains. Rwanda has participated in the General Data Dissemination System since October 2003.

Since the end of the civil war of 1994, Rwanda has received considerable technical assistance (TA) in rebuilding its statistical database, and there has been some progress in the compilation and dissemination of economic and financial statistics. In August 2005, the National Institute of Statistics (NIS) was established following the passage of the new Statistics Law.

National Accounts and Price Statistics

The national accounts are compiled and disseminated by NIS, based on 1968 System of National Accounts methodology. Quality is weak, reflecting inadequate human and material resources. While considerable effort was made to improve the reliability of GDP estimates using the production approach, significant weaknesses in data collection on expenditures, and income remain., complicating an adequate assessment of developments in savings and investment. The reliability of national accounts estimates is further hampered by weak external sector statistics.

Since 2003, the East AFRITAC has advised the authorities on real sector statistics issues, especially in secondary sector statistics. This assistance is focused on capacity building to enable the construction of short-term indicators such as a monthly PPI for the manufacturing sector. This is a joint project with the central bank (NBR). The results have not yet been integrated in the national accounts. A DFID project is also supporting the NIS with a component on national accounts, aiming to establish a program of economic surveys and the development of leading indicators that can serve as source data for national accounts estimates In February 2004 the EREBS group (Equilibre resources-emploi des biens et services) assisted the Ministry of Finance and Economic Planning (MINECOFIN) in developing new benchmarking GDP estimates (2001). Work has also advanced in the implementation of the 1993 SNA.

The consumer price index (CPI, 2003=100) utilizes expenditure weights derived from a 2000-1 survey of 6,450 households (local goods account for about 70 percent of expenditure and imported goods about30 percent; food and drink accounts for 37 percent of expenditures and housing and energy amount to 16 percent). Certain shortcomings remain, as the CPI aggregates infrequently purchased products in groups with all products in the respective group assigned the same weight.

Real sector data are reported regularly for publication in International Finance Statistics (IFS), although with some lags, particularly for GDP estimates. Data on employment and wages are not collected, except for the central government and for daily informal work.

Government Finance Statistics

Detailed monthly revenues and expenditures are reported to AFR with a lag of three to four weeks. These data are compiled by the flash-reporting unit of MINECOFIN. A functional classification of government expenditure has been designed and presented since the 2003 budget. Within the economic classification, expenditures on PRSP designated as “priority areas” are clearly identifiable. The fiscal data do not consistently capture capital expenditure because capital projects (almost entirely externally financed) are mainly carried out by line ministries outside the regular budget process. Compilation of data on external budgetary assistance as well as on external debt would benefit from strengthened coordination between the finance ministry and the central bank. Efforts are underway to integrate the development budget into the normal budgetary procedures. Fiscal data often showed a discrepancy between above-the-line deficits and financing estimates. To address these issues with the Fund staff, the authorities have made adjustments for changes in the balance of non-core government accounts, for changes in cash in vault at the revenue authority, for accounting errors, and for other factors.

Selected aggregates on annual central government operations through 2004 have been reported to STA for publication in the IFS, But are subject to large discrepancies, largely due to the timing of recording of expenditures. No sub-annual data are reported to STA, and government finance statistics (GFS) have not been reported for publication in the GFS Yearbook since 1993.

Monetary Statistics

The balance sheet of the NBR and detailed data on money market transactions are transmitted to the AFR on a weekly basis with a lag of one week, while the monetary survey and the consolidated balance sheet of the country’s commercial banks are transmitted on a monthly basis with a lag of about five weeks. Detailed data on interbank money market transactions are also provided upon request to mission staff. Monetary data are reported separately to STA and published in IFS. The data relating to the central bank are provided with a five-week lag while the data on commercial banks are reported with a delay of about three months. As a result of implementing TA recommendations, the NBR (1) adapted in early 2004 the reporting format for the banking sector closer to the methodology proposed in the Monetary and Financial Statistics Manual; and (2) is expanding the institutional coverage of the monetary survey to include credit and savings unions and microfinance institutions. Despite these efforts, inconsistencies remain in the banking sector data and a STA monetary and financial statistics mission is planned for 2007 to address outstanding issues.

The NBR is in the process of submitting monetary statistics through the Standardized Report Forms (SRFs). Following the provisional submissions by the NBR of SRFs covering January through December 2004, the NBR has completed the transition to report the 1SR for central bank data. It has not yet completed the process for the 2SR for the commercial banks and reporting under the existing framework has continued.

External Sector Statistics

The quality of balance of payments is affected by weaknesses in the collection of source data (treatment of customs data and bank settlement reports, questionnaires) and insufficient staffing.

A June 2003 multisector statistics mission identified the following areas for improvement in the short run: (1) reorganizing data entry and production of external trade statistics, using ASYCUDA and Eurotrace software; (2) adapting survey forms sent to companies to the BPM5 methodology; and (3) collaborating with Central Public Investments and External Finance Bureau (CEPEX) to obtain data on international and bilateral aid. Subsequently, STA balance of payments statistics missions visited Kigali in January 2004 and June 2005.

Some improvements have been noted. In particular, the collection of data through direct surveys seems to be well in place, with a satisfactory rate of response, except for embassies. Also, with the assistance of these missions, the NBR has started compiling BOP/IIP statistics in conformity with international standards.

Nevertheless some weaknesses remain, in particular, the compilation of trade data relies extensively on estimates because of delays in the processing of customs declarations. The treatment of bank settlement reports is not effective, because the complete automation of the collection of declarations has not been achieved. And, finally, there is still no appropriate treatment of data on foreign official aid, for which no distinction is made between grants and loans.

Annual balance of payments and IIP data through 2005 have been reported to STA for publication in the IFS.

Databases on external public debt are maintained by both MINECOFIN and the NBR. A committee, composed of staffs from the Ministries of Finance and Economic Planning and Foreign Affairs and the NBR, is responsible for collecting, harmonizing, and monitoring information on external public debt.

Table 3.

Rwanda: Table of Common Indicators Required for Surveillance (As of December 13, 2006)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Semi-annually (SA); Irregular (I); Not Available (NA).


Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.


Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.


The Multilateral Debt Relief Initiative (MDRI) provides 100 percent debt relief to eligible member countries that are qualified for the assistance. The debt relief covers the full stock of debt owed to the Fund as of end-2004 which remains outstanding at the time the member qualifies for such debt relief. The MDRI is financed by bilateral contributions and the Fund’s own resources, as well as the resources already disbursed to the member under the HIPC Initiative (see Section VII above).

Rwanda: 2006 Article IV Consultation, First Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for Waiver of Nonobservance of Performance Criteria
Author: International Monetary Fund