IMF Executive Board Concludes the 2019 Article IV Consultation and Request for a Three-Year Policy Coordination Instrument with Rwanda

Staff Report for 2019 Article IV Consultation and a Request for a Three-Year Policy Coordination Instrument-Press Release; Staff Report; and Statement by the Executive Director for Rwanda


Staff Report for 2019 Article IV Consultation and a Request for a Three-Year Policy Coordination Instrument-Press Release; Staff Report; and Statement by the Executive Director for Rwanda

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.”

Recent Economic Developments

Rwanda has achieved notable success in reaching its development objectives. A combination of strategic goal-setting, public accountability, and broad ownership of policies has helped the country emerge from fragility as one of the fastest-growing economies in SSA and the world. Moreover, growth has been inclusive, and extensive investment in social safety nets has reduced poverty significantly.

The economic outlook remains positive. Real GDP growth reached 8.6 percent y-o-y in 2018 supported by activity in construction and services. Composite indicators suggest a continued trend in early 2019. Projections over the next five years have been revised up, to around 8.0 percent, based on first round effects of higher public investment spending agreed under the macroeconomic framework. Inflation is expected to rise in the second half of 2019 and remain thereafter within the target band also supported by policy easing by the National Bank of Rwanda. The current account deficit is expected to increase in 2019–20, due to airport construction, and decline thereafter.

Rwanda’s economic outlook is subject to balanced risks. Acceleration of several large public and private ongoing investment projects (including peat power plant, tin smelting factory, new energy distribution substations and construction of new Special Economic Zones) and their potential impact on productivity, as well as enhanced regional trade ties, pose upside risks to growth. Potential downside risks include lower than expected ODA, variable weather/climate change, commodity price movements, and regional security issues.

Program Summary

The program is designed to support implementation of the National Strategy for Transformation, while maintaining macroeconomic stability. The program consists of four main pillars: (1) recalibrating fiscal objectives and the medium-term fiscal stance; (2) bolstering domestic revenues over the medium term; (3) improving public financial management, notably fiscal risk management and transparency; and (4) supporting the new monetary policy framework, including through financial sector development.

The National Bank of Rwanda (BNR) continues its efforts to ensure successful implementation of the new interest rate-based monetary policy operational framework. These include commitments to strengthen communication and further deepen money markets, including by strengthening the repo market, to strengthen monetary policy transmission and enhance credibility of the new framework.

Structural reforms focus on supporting the National strategy and Transformation policies including by bolstering long-term savings, upgrading the national payments system and introducing new platforms for broader participation in the government securities market and more interaction across types of financial services providers. Rwanda’s ambitions for Vision 2050 and SDG achievement will also be supported by a renewed focus on the quality of education and private sector-led growth.

Executive Board Assessment2

Directors commended the authorities’ effective use of strategic goal-setting, public accountability, and broad ownership of policies to bring about rapid and inclusive growth, and significant progress toward their development objectives. Directors agreed that a PCI will appropriately support the authorities’ efforts to build on their progress. They highlighted the importance of continued strong ownership of the reform agenda, as well as strong donor support and capacity building.

Directors welcomed the new program’s focus on supporting Rwanda’s National Strategy for Transformation (NST), aimed at accelerating the achievement of the country’s development goals. They supported recalibrating the medium-term fiscal stance to provide more room for priority capital investment and social spending while maintaining a low risk of debt distress, with some Directors stressing the importance of consistency with the EAC fiscal deficit convergence. Directors emphasized the importance of domestic resource mobilization, including streamlining tax exemptions, strengthening tax policy capacity, and developing a medium-term revenue strategy. They welcomed the authorities’ commitment to further strengthen public financial management by identifying and mitigating potential fiscal risks and further enhancing fiscal transparency.

Directors agreed that Rwanda’s new monetary policy operational framework is appropriate and welcomed the recent easing aimed at bringing inflation back within the target range. They took positive note of the central bank’s active policy operations that have led to a convergence of money market and policy rates and welcomed the nascent transmission of policy to longer-term rates. Directors emphasized that the authorities’ commitment to a more flexible exchange rate regime, combined with improved liquidity management, forecasting, and communication, would further strengthen monetary policy transmission.

Directors welcomed the NST’s focus to increase reliance on the private sector as an engine of growth and job creation and highlighted the supportive measures to bolster financial development and mobilize national savings and improve education. Noting Rwanda’s inherent challenges in attracting private investment, they welcomed the African Continental Free Trade Area as a means for creating larger markets. They saw initiatives such as the G-20 Compact with Africa, together with aid directed toward blended finance, as vehicles to leverage additional private financing.

Table 1.

Rwanda: Selected Economic Indicators, 2017–23

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Sources: Rwandan authorities and IMF staff estimates.

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: