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US: IMF reviews Rwanda’s economic performance

The Executive Board of the International Monetary Fund (IMF) has completed the second review of Rwanda’s economic performance under the programme supported by the Policy Support Instrument (PSI) and also concluded the 2014 Article IV consultation with Rwanda.

An IMF statement, sent to PANA in New York on Thursday, quoted Naoyuki Shinohara, IMF’s
Deputy Managing Director and acting Board Chair, as commending the Rwandan authorities for their strong implementation of the economic programme supported by the PSI, which it carried out against a challenging economic environment.

Mr. Shinohara said poverty has declined over time, economic growth has recovered since
2013, and inflation remains contained.

He said: “Fiscal policies remain prudent and the objectives of the fiscal year 2014/15 budget
are within reach, and in the medium term, fiscal deficits are projected to decline with limited
recourse to domestic financing.”  

“Strengthening the domestic revenue base is an important objective, including for reducing
aid dependency, and the authorities should vigorously pursue improvements in revenue
administration and tax policy improvements in agriculture, mining and property.

“The central bank’s current monetary policy stance is appropriate in view of rising inflationary
pressures and the more flexible monetary policy framework will serve to make monetary
policy implementation more effective.

“However, stepped-up efforts are needed to better promote financial deepening and inclusion,
including through implementation of the Financial Sector Development Plan, and to enhance
domestic and cross-border financial supervisory and regulatory frameworks,” he stated.

The IMF official also said: “The government has taken important steps to strengthen Rwanda’s debt management capacity and project implementation, including establishment of a Debt Management Unit.”  

Mr. Shinohara, however, said the available room to fund new infrastructure projects and maintain a low risk of debt distress is limited, and sensitive to changing economic circumstances, and this requires consistent and prudent debt management, through exploring all available concessional financing options, private sector involvement and judicious use of non-concessional borrowing.

He therefore noted that, “removal of remaining structural impediments to private sector
investment will help foster greater regional integration and export diversification, while efforts
are needed to strengthen the business environment, including by lowering business costs
and reducing remaining trade barriers.”

The statement said the IMF Executive Board also completed the 2014 Article IV Consultation
with Rwanda.

It said Rwanda’s economic performance since the turn of the century has been remarkable,
stating that strong policies have played a key role in maintaining Real Gross Domestic
Product (GDP) growth at 7.8 per cent on average since 2000, with significant poverty reduction.

It said the economy is recovering from the disruptions induced by aid suspension through
mid-2013, with growth bouncing back in the first half of 2014 and inflation well contained.

“The fiscal deficit for the fiscal year 2014/15 continues to be in line with available resources.
Tax revenue is expected to increase by 1 per cent of GDP this fiscal year, bringing it to
almost 16 percent of GDP.

“Continued efforts to mobilize more domestic revenue should allow Rwanda to reduce its
reliance on donor resources and finance its ambitious development agenda,”the statement

It further said growth in 2014 is expected to be about 6 per cent, rising to the longer-term
growth rate of 7.5 percent in the medium term.

“This reflects improved implementation of government projects and a rebound in agriculture
because of favourable climatic conditions early in the year, and prospects in construction
and real estate are also favorable.

“Inflation is projected at about 3 per cent by end year, converging to the authorities’ target
of 5 per cent in the medium term and in terms of risks, weather conditions and delayed
project implementation would hinder growth prospects, and a protracted period of slower
growth in advanced economies or a decline in commodity prices – minerals and traditional
exports would adversely affect exports,” it added.


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