Rwanda: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver of Nonobservance of Performance Criterion, and Modification of Performance Criteria—Informational Annex

The Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility of Rwanda explains macroeconomic challenges. Indicative limits on domestic debt have been established. If these limits are exceeded or inflation is rekindled, the domestic component of fiscal spending must be released more gradually. On the structural side, the focus remains on public financial management (PFM) and the financial sector. The authorities’ financial sector development plan is a sound basis for building long-term financial markets.


The Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility of Rwanda explains macroeconomic challenges. Indicative limits on domestic debt have been established. If these limits are exceeded or inflation is rekindled, the domestic component of fiscal spending must be released more gradually. On the structural side, the focus remains on public financial management (PFM) and the financial sector. The authorities’ financial sector development plan is a sound basis for building long-term financial markets.

II. Appendix I. Rwanda: Relations With the Fund

(As of April 30, 2007)

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 (NBR) was subject to a safeguards assessment with respect of the PRGF arrangement approved on June 12, 2006. The update assessment proposed recommendations to address continuing vulnerabilities in the external audit and financial reporting areas. The implementation of these measures is being monitored by IMF staff.

X. Exchange System:

The Rwanda franc was pegged to the SDR until March 6, 1995, when Rwanda adopted a market-determined exchange rate system. However, in the IMF’s most recent Quarterly Report on Exchange Arrangements, the exchange rate regime was reclassified to a conventional fixed peg. 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 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 2006 Article IV consultation (IMF Country Report No. 07/80) on January 29, 2007.

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.

XV. Management Visit:

The Deputy Managing Director, Mr. Portugal, visited Rwanda during May 3-5, 2007.

Appendix II. Rwanda: Relations with the World Bank Group

(As of May 2007)

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 2006. 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 continued with the same areas of focus and went to the Board in December 2006. The Bank has initiated the preparation of a fourth PRSG which could be presented to the Board by the middle of the next fiscal year.

International Development Agency (IDA) Program: Rwanda joined the World Bank in 1963. Since then, the country has been approved for 69 IDA credits and grants totaling approximately US$1.4 billion. As of March 2007, there were twelve ongoing operations with a commitment value of about US$347 million and an undisbursed balance of roughly US$162 million.

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 following outlines the IFC program in Rwanda:

  • Infrastructure: IFC is working with the World Bank and GOR to explore financing opportunities for the Lake Kivu Methane Gas Project (KPI). IFC has committed US$7.5 million to M/s Intraspeed SA Rwanda Ltd (ISARL), a major freight and forwarding company in the Great Lakes Region, to help upgrade and expand the company’s freight hauling capabilities.

  • Financial sector: IFC is considering providing long term credit lines and trade finance products to privatized banks-- Banque Commerciale du Rwanda (BCR) and Bancor.

  • Tourism: IFC is considering providing financing (up to US$7.0 million) for the expansion and modernization of the Serena Hotel in Kigali, and the Kivu Sun in Kibuye, recently acquired by Tourism Promotion Services of the Aga Khan Fund for Economic development (AKFED). IFC is also considering financing the rehabilitation and refurbishment of Hotel Milles de Collines, recently sold to Milkor hotels.

  • Privatization: IFC is advising the Government of Rwanda on the privatization of Rwanda Air.

  • Small Investment Prospects in Selected African Countries: Rwanda is one of 6 African countries selected by IFC to participate in a special study to identify prospects for smaller investments. A few leads have been identified.

  • PEP-Africa: Technical assistance programs in Financial and SME sectors. Rwanda Leasing Program and Rwanda Entrepreneurship Program were launched on March 15, 2007. IFC is exploring the possibility of launching Gender Entrepreneurship Markets (GEM) in Rwanda.

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).

III. Table 1:

Summary of Bank-Fund Collaboration

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Table 2:

Status of Active Operations

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Appendix III. Rwanda: Statistical Issues

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

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 the NIS, based on the 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 hinders assessment of 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. This assistance is focused on capacity building to enable the construction of short-term indicators such as a monthly PPI for the manufacturing sector, which 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. The NIS is working on a new benchmarking of 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- 01 survey of 6,450 households (local goods account for about 70 percent of expenditure and imported goods about 30 percent; food and drink account 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 equal weight.

Real sector data are reported regularly for publication in International Finance Statistics (IFS), although with some lag, 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 available since the 2003 budget. Within the economic classification, expenditures on PRSP-designated “priority areas” are clearly identifiable. The fiscal data do not capture capital expenditure consistently 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 deficits and financing estimates. To address these issues, the authorities have made adjustments for changes in the balance of non-core government accounts, changes in cash in vault at the revenue authority, accounting errors, and other factors.

Selected aggregates on annual central government operations through 2004 have been reported to STA for publication in the IFS, but these 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 AFR on a weekly basis with a lag of one week, while the monetary survey and the consolidated balance sheet of 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. 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 data on commercial banks are currently reported with a delay of about six months.

The NBR has made progress in the implementation of past TA recommendations. In particular, the NBR adapted in 2004 report forms used by the banking sector so that banks could report data that better reflect the methodology proposed in the Monetary and Financial Statistics Manual. In addition, the NBR is committed to expanding the institutional coverage of the monetary survey to include credit and savings unions and microfinance institutions. The NBR is also pursuing the migration to the Standardized Report Forms (SRFs) for the reporting of its data for dissemination in IFS. Despite these efforts, inconsistencies and problems of timeliness remain in the banking sector data. An STA monetary and financial statistics mission is planned for the second half of 2007 to address outstanding issues and to assist the authorities in completing the migration to standardized reporting.

External Sector Statistics

The 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. The June 2003 multi sector statistics mission recommended: (1) reorganizing data entry and production of external trade statistics, using ASYCUDA and Euro trace 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 followed up in January 2004 and June 2005, and an AFRITAC mission in October 2006.

Such technical assistance facilitated significant improvements. In particular, the collection of data through direct surveys seems to be well in place, with a satisfactory rate of response, except for embassies. The issue of coverage and availability of the data on external aid to the government and private sector has been solved, thanks to the restructuring of CEPEX (Central Public Investments and External Finance Bureau) and the development of a new database on external financing of the government, which is kept updated by the donors/lenders. Annual balance of payments and IIP data through 2005 have been reported to STA for publication in the IFS. Also, with the assistance of these missions, the NBR has started compiling BOP/IIP statistics in conformity with international standards.

Nevertheless some weaknesses remain, particularly in the compilation of trade data. There are discrepancies between the data on imports and exports published by the NIS and the NBR, which are essentially due to valuation problems. Also, the treatment of bank settlement reports is not effective, because of incomplete automation of the collection of declarations.

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, 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 May 23, 2007)

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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).