First Review Under the Policy Coordination Instrument and Monetary Policy Consultation-Press Release; and Staff Report

Abstract

First Review Under the Policy Coordination Instrument and Monetary Policy Consultation-Press Release; and Staff Report

Recent Developments

1. Growth has outpaced expectations, while inflation is picking up (Figure 1, Table 1). Real GDP rose by 10.3 percent y/y in the first half of 2019, with a pronounced increase in services and construction, the latter reflecting large public infrastructure projects and private residential and commercial projects. In addition to accelerated public investment in roads, electricity, and water, growth was stimulated by renovation of a sports/concert arena in Kigali. Leading indicators suggest strong growth will continue. Headline inflation continued to rise as projected, settling at 4.4 percent y/y in October. The increase reflects base effects for food and stronger demand operating on core inflation (2.8 percent in October).

Figure 1.
Figure 1.

Rwanda: Overview of Recent Economic Developments

Citation: IMF Staff Country Reports 2020, 009; 10.5089/9781513526706.002.A001

Source: Rwandan Authorities, and IMF staff estimates.
Table 1.

Rwanda: Selected Economic Indicators, 2018–21

article image
Sources: Rwandan authorities and IMF staff estimates.

Overall deficit excluding spending on materialized contigent liabilities and other items already included in the DSA.

uA01fig01

Rwanda: Contributions to GDP Growth

(percent)

Citation: IMF Staff Country Reports 2020, 009; 10.5089/9781513526706.002.A001

Source: Rwandan Authorities, Annual share of public investment applied to quarters.
uA01fig02

Inflation

(percent y/y)

Citation: IMF Staff Country Reports 2020, 009; 10.5089/9781513526706.002.A001

Source: Rwandan Authorities, and IMF staff calculations,

2. The FY 18/19 deficit was higher than expected but remained within the adjusted program ceiling (Figure 2, Tables 2ab, 2cd). The fiscal deficit (commitment basis) was higher than programmed, mainly due to higher externally-financed investment spending execution, lower-than-expected budgetary grants, and higher net outlays for UN peacekeeping operations (PKO). This was partly compensated for by overperforming domestic revenues and lower net lending. Despite the increase in foreign-financed investment, unearmarked grants and concessional financing were lower than expected due to technical reasons and some delays in meeting conditionality.1 This became evident late in the fiscal year, creating shortfalls against spending commitments. Due to concerns about crowding out the private sector, the temporary solution was to allow an increase in accounts payable (float) by 0.9 ppts of GDP.2 About one-third of the float was cleared by the arrival of the previously-anticipated disbursements early in FY19/20.

Figure 2.
Figure 2.

Rwanda: Fiscal Developments

Citation: IMF Staff Country Reports 2020, 009; 10.5089/9781513526706.002.A001

Source: Rwandan Authorities, and IMF staff estimates.
Table 2a.

Rwanda: Budgetary Central Government Flows, GFSM 2014 Presentation, FY17/18–21/221

(billions of Rwandan Francs)

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Sources: Rwandan authorities and IMF staff estimates and projections.

Fiscal year runs from July to June.

Table 2b.

Rwanda: Budgetary Central Government Flows, GFSM 2014 Presentation, FY17/18–21/221

(percent of GDP)

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Sources: Rwandan authorities and IMF staff estimates and projections.

Fiscal year runs from July to June.

Table 2c.

Rwanda: Budgetary Central Government Flows, FY17/18–21/221

(billions of Rwandan Francs)

article image
Sources: Rwandan authorities and IMF staff estimates and projections.

Fiscal year runs from July to June.

Overall deficit excluding spending on materialized contigent liabilities and other items already included in the DSA.

A negative sign indicates a reduction.

Commercial borrowing to finance budget.

A negative number implies an overestimate of financing.

Table 2d.

Rwanda: Budgetary Central Government Flows, FY17/18–21/221

(percent of GDP)

article image
Sources: Rwandan authorities and IMF staff estimates and projections.

Fiscal year runs from July to June.

Overall deficit excluding spending on materialized contigent liabilities and other items already included in the DSA.

A negative sign indicates a reduction.

Commercial borrowing to finance the budget.

A negative number implies an overestimate of financing.