On June 28, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation and approved a new Three-Year Policy Coordination Instrument (PCI) with Rwanda. 1
Rwanda continues to make notable progress in sustaining high and inclusive growth. Rwanda’s National Strategy for Transformation (NST) aims to make progress toward the SDGs, but its financing will be challenging.
The newly-approved PCI-supported program will build on the successes of Rwanda’s previous programs with the IMF. The program aims to support NST implementation, including through an eased fiscal policy stance and additional domestic resource mobilization, while also maintaining external and debt sustainability. Program reviews will take place on a semi-annual fixed schedule. While the PCI involves no use of IMF financial resources, successful completion of program reviews will help signal Rwanda’s commitment to continued strong macroeconomic policies and structural reforms.
Following the Executive Board’s discussion on Rwanda, Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:
“Rwanda has made notable progress in reaching its development objectives. Rapid and inclusive growth has been based on a combination of strategic goal-setting, public accountability, and broad ownership of policies. This was supported by strong macroeconomic performance and rapid responses to shocks, for example, the recent exchange rate adjustment that helped align the external position with fundamentals.
“Growth in 2018 was stronger than expected, at 8.6 percent, led by construction and services. Growth should remain around 8 percent in 2019, supported by public investment spending, private investment, and interventions aimed at promoting diversified and higher value-added economic activity. Inflation has been below the authorities’ targeted band for several months, prompting the central bank to lower its policy rate in May.
“The new PCI-supported program supports Rwanda’s National Strategy for Transformation (NST), while safeguarding external and debt sustainability. An eased medium-term fiscal stance will provide more room for priority investments, while keeping debt risks low. NST implementation will also be supported by measures to mobilize domestic revenues and to further strengthen public financial management.
“The central bank has made good progress in implementing its new forward-looking, interest rate-based operational framework. Short-term interest rates convergence and the nascent monetary transmission to longer-term interest rates should be further reinforced through continued active liquidity management, deeper money markets, and enhanced communications of policy intentions.
“Going forward, the NST aims to make progress toward the Sustainable Development Goals and help crowd in the private sector as an engine for growth. However, financing the strategy will be challenging. Initiatives such as the African Continental Free Trade Area and the Compact with Africa should help leverage additional private financing.”
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.