2023-05-24 22:40:21
The Executive Board of the International Monetary Fund (IMF) today finalized the first reviews of Rwanda’s Instrument of Policy Coordination (PCI) and program under the Resilience and Sustainability Mechanism (RSF). The Board’s decision allows for an immediate disbursement of SDR 73.95 million (about US$98.6 million) under the Resilience and Sustainability Mechanism. The PCI and RSF deal was approved on December 12, 2022, the latter with a total value of SDR 240.3 million (about US$319 million or 150% of the quota).
Rwanda’s economy continued accelerated post-pandemic growth in 2022, but macroeconomic imbalances emerged. Rising food prices and strong domestic demand fueled by high credit growth contributed to persistent inflation, which stood at 17.8% in April.
Robust import demand, along with high commodity prices and tightening global financing conditions, weakened Rwanda’s external position. The uncertain external environment and diminished prospects for external project finance are compounding the legacy challenges of recent global crises.
A strong and carefully calibrated policy mix – including early adjustment of fiscal policy, corrective actions to address delays in domestic revenue mobilization, a decisive tightening of monetary policy, and greater exchange rate flexibility – is needed to correct domestic imbalances. , promote external stability and channel resources towards the authorities’ ambitious development and climate agenda.
The outlook is subject to great uncertainty, stemming mainly from the risks of deepening geopolitical fragmentation, volatility in global energy and fertilizer prices, a sharper-than-projected decline in growth from trading partners, or a financing squeeze.
Despite the challenging environment, reforms have remained ongoing under the PCI, while the authorities’ commitment to advancing the climate agenda has been very strong.
The RSF-supported program, a first for an African country, will advance the authorities’ efforts to build resilience to climate change by improving transparency and accountability in the planning, execution, reporting and oversight of budgetary resources dedicated to tackling climate change.
At the conclusion of the Executive Board discussion, the IMF welcomed Rwanda’s commitment to building socio-economic resilience and efforts to transition to greener and more sustained growth. Rwanda remains at the forefront of combating adaptation to climate change and is the first country in the sub-Saharan region to benefit from the RSF. It will be important to advance reforms in green public financial management and climate-focused public investment management, with the aim of creating an enabling environment to attract climate finance and support private green investment.
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