Abstract
This paper discusses key findings of the Sixth Review under the Poverty Reduction and Growth Facility (PRGF) for Rwanda. All end-2008 quantitative performance criteria were met, and performance through March 2009 was broadly satisfactory. IMF staff recommends completion of the sixth review under the PRGF arrangement based on Rwanda’s performance and understandings reached on the macroeconomic program for 2009/10. IMF staff also supports the authorities’ request for waivers of nonobservance of performance criteria on nonconcessional borrowing and nonintroduction of multiple currency practices.
The Executive Board of the International Monetary Fund (IMF) completed today the sixth review under the three-year Poverty Reduction and Growth Facility (PRGF) arrangement with Rwanda (see Press release No. 06/121). The completion of the review enables the immediate disbursement of SDR 1.17 million (about US$ 1.8 million), bringing the total amount disbursed under the program to SDR 8.01 million (US$12.4 million).
The Board also approved the authorities’ request for four waivers regarding nonobservance of performance criteria related to guaranteeing of new non-concessional external debt with original maturity of more than one year, and the modification of multiple currency practices.
Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chairman, stated:
“The Rwandan authorities are to be commended for the satisfactory implementation of their program supported by the PRGF arrangement, notwithstanding an increasingly difficult external environment. Macroeconomic stability has strengthened, and important strides were made in establishing the base for sustained growth and further poverty reduction. Since early 2009, the global crisis has resulted in a fall in export revenue and a slowdown in economic activity. The policy responses to these challenges have been broadly appropriate, including increased fiscal spending and an easing of the monetary policy stance. For the 2009/10 fiscal year, the main challenge will be to cushion the impact of the global economic crisis while preserving fiscal and external sustainability.
“The fiscal program envisages a moderate stimulus to minimize the adverse effects of the economic slowdown. The higher budget deficit will be financed by withdrawing government deposits at the central bank. Gradual fiscal consolidation over the medium term should focus on increasing public revenues while safeguarding priority spending.
“The monetary program will aim to balance the objectives of achieving single digit inflation while providing sufficient liquidity to the banking system. A limited transfer of government deposits from the central bank to commercial banks will help sustain long-term credit in the second half of 2009. Looking ahead, a more proactive use of available monetary policy instruments, including interest rate and exchange rate flexibility, would strengthen the effectiveness of monetary policy and support the long-term sustainability of the balance of payments.
“The authorities’ structural reform agenda is expected to further improve public services delivery. The planned reforms in public financial management and revenue administration are encouraging. Implementation of the financial sector reform program, including strengthened supervision and improved risk management by the banks, will support financial deepening.”