IMF Executive Board Completes Fourth Review Under the Policy Support Instrument for Rwanda

The Executive Board of the International Monetary Fund (IMF) has completed on June 7, 2012, the fourth review under a three-year Policy Support Instrument (PSI) for Rwanda.¹ The Executive Board’s decision was taken on a lapse of time basis.²

The Rwandan economy continued to grow strongly, and its economic program supported under the PSI remains on track. Real GDP growth is estimated at 8.6 percent for 2011, driven by agricultural output, exports, and domestic demand. Inflation rose sharply—mainly due to rising food and fuel prices but also an accommodative monetary policy—but stayed in single digits (8.3 percent in March 2012) and was the lowest in the region. All quantitative assessment criteria for end-December 2011 including fiscal and monetary targets were met. Most structural benchmarks were also met, albeit some with delays. In completing the review, the Executive Board approved the modification of the end-June 2012 assessment criteria. Rwanda continues to be assessed at moderate risk of external debt distress.

Growth is expected to remain high in 2012, but risks remain—a renewed global slowdown or sharply higher world fuel prices could threaten growth, revenue, and inflation objectives. The fiscal framework for 2012/13 is in line with the main objectives of the PSI, and the authorities committed to delay non-priority spending rather than resort to additional domestic financing if revenue collections fall short of target. Efforts are ongoing to further strengthen public financial management and enhance revenue administration. Monetary policy is aimed at maintaining inflation in single digits, and efforts are continuing to improve the liquidity management framework. To that end, it will be important to be proactive in monetary policy and improve the functioning of the money and foreign exchange markets. Improving access to financial services while safeguarding financial stability remains a key objective for Rwanda. Careful management of the consolidation of Savings and Credit Cooperatives will be very important in that regard.

The Executive Board approved a three-year PSI for Rwanda on June 16, 2010 (see Press Release No. 10/247).