Rwanda: Third Review Under the Policy Coordination Instrument—Press Release; Staff Report; and Statements by the Executive Director and Staff Representative for Rwanda

Third Review Under the Policy Coordination Instrument-Press Release; Staff Report; and Statement by the Executive Director and Staff Representative for Rwanda

Abstract

Third Review Under the Policy Coordination Instrument-Press Release; Staff Report; and Statement by the Executive Director and Staff Representative for Rwanda

Recent Developments

1. The Rwandan authorities’ early response to the COVID-19 pandemic has helped contain the spread of the virus but the pandemic’s adverse impact on social and economic outcomes are substantial (Figure 1). The pandemic’s progression in Rwanda has been slower relative to regional peers, helped by good public health preparedeness, the early adoption of stringent social distancing measures and efforts to hike testing capacity.1 As of November 19, Rwanda has recorded 5,543 cases of infection and 46 deaths, with the number of daily cases moderating. The reopening of the economy has accelerated with additional steps to relax domestic movement restrictions and reopen schools, among others. The social impact of the pandemic is expected to be significant (Box 1), with available estimates suggesting that up to 1 million people could fall into poverty.

Figure 1.
Figure 1.

Rwanda: Pandemic Overview

Citation: IMF Staff Country Reports 2021, 001; 10.5089/9781513565927.002.A001

Source: National Institute of Statistics Rwanda (NISR), Global Health Security Index Report (Oct 2019), Johns Hopkins CSSE, World Bank WDI, Finmark Trust ‘Our World in Data’ databases and IMF staff calculations.1/The Global Health Security score assesses countries’ health security and capabilities across six categories: prevention, detection and reporting, rapid response, health system, compliance with international norms, and risk environment

Rwanda: Lockdown and Poverty

article image
Sources: Report by United Nations Rwanda, The Socio-Economic Impact of COVID-19 in Rwanda (June 2020); and International Growth Center, The Economic Impact of CO VID-19 Lockdowns in sub-Saharan Africa.

The Social Impact of the Pandemic: An Initial Assessment1

COVID-19 is expected to lastingly reduce consumption and employment, especially for the poor. Household consumption is expected to drop by double-digits and remain depressed for the next decade, with the poorest 20 percent of rural households expected to suffer the most (14.2 percent drop in consumption through 2030). Employment could be 8.4 percent lower in 2020, with large losses in all major sectors.

Impact of COVID-19 on Different Quintiles of the Consumption Distribution

Citation: IMF Staff Country Reports 2021, 001; 10.5089/9781513565927.002.A001

Source: World Bank estimates.

Rwanda has experienced disruptions in the delivery of essential health services, immunization programs, and other child services. Controlling for seasonality and facility type, Rwanda is found to have experienced statistically significant disruptions during March-May 2020 (peak of the lockdown) with persistent effects on institutional deliveries, but with many services recovering in subsequent months. Various children vaccination programs (e.g., Polio3, Penta3, BCG) recorded less participation than in 2019. Treatment for malaria, diarrhea, and pneumonia in under-five children fell well below 2019’s levels.

Outpatient Health Facility Visits

Citation: IMF Staff Country Reports 2021, 001; 10.5089/9781513565927.002.A001

Source: World Bank estimates.

Education losses are likely to be substantial, especially for children from poorer households. Remote learning was quickly instituted as an estimated 3.5 million children remained out of school for most of 2020. However, participation fell over time, partly due to a lack of interactive learning, the shortness of the broadcast period, parents’ unwillingness to allow their children unsupervised access to radios and phones, and difficulties in English. Previously existing inequalities are also expected to widen, as poorer children’s limited access to technologies may affect their engagement in remote learning. A recent phone survey also revealed concerns with reduced enrollment, with 63 percent of teachers expecting higher dropout rates. Research in other countries suggests that students in grades 1–12 affected by the closures might expect approximately 3 percent lower incomes over their lifetimes.2

The Rwandan government’s swift and effective response has averted the potential for much larger losses in social outcomes. The share of positive COVID-19 results among the tested population (the single best metric for measuring effectiveness) remains one of the lowest in the world. Estimates suggest that, had Rwanda experienced similar declines in health service utilization as observed in other global epidemics, child and maternal mortality could have increased by 29 and 23 percent respectively through 2021. Key elements of the government’s response plan include a food distribution program, an expansion of the social safety net, and ongoing improvements in the targeting of social programs using a Household Welfare Scorecard (HWS), inter alia. Rwanda also benefited from its strong pre-COVID-19 primary health system.

1/ This box draws from the World Bank’s forthcoming “Rwanda Economic Update” Report on the impact of the COVID-19 response with special focus on Human Capital. However, the assessment in this box excludes mitigating measures.2/ Eric A. Hanushek & Ludger Woessmann, 2020. “The Economic Impacts of Learning Losses”; OECD Education Working Papers 225, OECD Publishing.

2. The pandemic shock slowed economic activity significantly in the first half of 2020, and the recovery has been tepid so far (Figure 2, Table 1). Heavy rains, a decline in the pace of investment, and the COVID-19 outbreak affected activity in 2020Q1 leading growth to decelerate to 3.6 percent y/y from 6.1 percent in 2019Q1. Subsequent measures to contain the spread of the virus deepened the economic slowdown, with output contracting by 12.4 percent in Q2, slightly more than envisaged at the time of the RCF-2 request. The contraction was broad-based, with substantial output loss in services and industry. Business turnover data and the National Bank of Rwanda (BNR)’s Composite Index of Economic Activity suggest a return to recovery in Q3, albeit at a much slower pace. Demand for new loans dropped by 9 percent y/y in 2020H1, but private sector credit continued to grow, supported by loan restructuring. Headline inflation declined to 7.2 percent y/y in October, driven by a decrease in public transport fares and moderation of food inflation. Monetary policy remains accommodative, with the Monetary Policy Committee (MPC) keeping the policy rate unchanged at 4.5 percent following its November meeting (Figure 5, Table 3).

Figure 2.
Figure 2.

Rwanda: Overview of Recent Economic Developments

Citation: IMF Staff Country Reports 2021, 001; 10.5089/9781513565927.002.A001

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

Rwanda: Selected Economic Indicators, 2019–25

article image
Sources: Rwandan authorities and IMF staff estimates.

Overall deficit excl. spending on materialized contigent liabilties and other items already incl. in the DSA.

Table 2a.

Rwanda: Budgetary Central Government Flows, GFSM 2014 Presentation, FY19/20–24/251

(billions of Rwandan Francs)

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

Fiscal yeat runs from July to June.

Additional support to Rwandair.

Economic Recovery Fund.

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

Debt creating overall balance as previously defined excluding spending related to natural disasters and Coronavirus outbreak.

Table 2b.

Rwanda: Budgetary Central Government Flows, GFSM 2014 Presentation, FY19/20–24/251

(percent of GDP)

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

Fiscal yeat runs from July to June.

Additional support to Rwandair.

Economic Recovery Fund.

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

Combined revenue and expenditure measures required for the projected fiscal consolidated path. To be clarified following the forthcoming MTRS and the PER/PIMA exercises.

Table 2c.

Rwanda: Budgetary Central Government Flows, GFSM 1986 Presentation, FY19/20–24/251

(billions of Rwandan Francs)

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

Fiscal year runs from July to June.

Economic Recovery Fund and additional support to Rwandair.

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

Debt creating overall balance as previously defined excluding spending related to natural disasters and Coronavirus outbreak.

A negative sign indicates a reduction.

A negative number implies an overestimate of financing.