IMF Executive Board Completes Fourth Review Under the Policy Coordination Instrument (PCI) and Request of an Extension of the Policy Coordination Instrument for Rwanda
July 6, 2021
- Real GDP is projected to rebound to 5.1 percent this year, after a contraction of 3.4 percent in 2020. The outlook remains uncertain due to the protracted impact of the pandemic and uncertainty on adequate vaccine availability.
- The authorities continue to appropriately balance their policy response to contain the pandemic, including by procuring vaccines, and minimize its long-lasting impacts, with maintaining fiscal sustainability.
- The Policy Coordination Instrument (PCI) continues to provide a policy anchor for the next phase of the authorities’ COVID-19 response and for supporting a strong and inclusive recovery. The authorities requested a one-year extension of the PCI, which was initially set to expire on June 15, 2022.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed on July 1, 2021 the Fourth Review under the Policy Coordination Instrument (PCI) for Rwanda and approved a one-year extension of the PCI. [1] The PCI was approved on June 28, 2019 (Press Release No.19/258) to facilitate macroeconomic and financial stability, while advancing an ambitious reform agenda under Rwanda’s National Strategy for Transformation (NST). Program implementation has been strong with program priorities shifting in response to the COVID-19 pandemic to supporting the economy and people through the crisis.
The COVID-19 pandemic continues to exert a large impact on Rwanda’s economy and social fabric. Real GDP growth contracted by 3.4 percent in 2020. Despite a second wave of infections that prompted a three-week lockdown in Kigali in early 2021, real GDP is projected to rebound by 5.1 percent in 2021, reflecting the start of vaccine rollout, and scaled-up government spending to accommodate additional spending needs due to the
more protracted nature of the pandemic and the need to minimize scarring. Growth is expected to return to its pre-pandemic trend by end-2023. However, downside risks to growth remain substantial owing mainly to uncertainties surrounding the availability and timely delivery of vaccines.
The authorities’ policy response has remained well-designed and targeted. It aims at swiftly procuring and securing financing for vaccines, increasing fiscal support for households and businesses, and providing sufficient liquidity to the banking system given the protracted nature of the pandemic and the need to minimize any lasting socioeconomic impact. To accommodate additional spending needs, the authorities have appropriately relaxed the fiscal program targets, while enhancing their efforts to contain fiscal risks to safeguard debt sustainability and adopting a gradual fiscal consolidation as soon as the crisis abates.
While bringing the pandemic to an end remains the utmost priority, going forward policies must continue to strike a balance between ensuring a rapid and inclusive economic recovery with maintaining fiscal sustainability and financial stability. The authorities have requested a one-year extension of the PCI to make progress on ongoing reforms and policies under the program to support the economic recovery, meet their fiscal consolidation and debt objectives, strengthen fiscal transparency, contain fiscal risks, and ensure the financial system remains sound.
Following the Executive Board’s discussion of Rwanda, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:
``The COVID-19 pandemic continues to exact a large economic and social toll on Rwanda, with real output contracting in 2020 and the number of people falling into poverty increasing. While the deployment of vaccines is expected to support the recovery, their timely delivery remains uncertain, posing a significant downside risk to the outlook.
``Given the protracted nature of the pandemic, an increase in the fiscal deficit should allow the authorities to accommodate further spending to cushion the impact of COVID-19 by supporting hard-hit businesses and vulnerable households. Monetary policy has also been accommodative to help keep the banking sector liquid and support borrowing.
``However, rising debt levels call for balancing efforts to sustain the recovery with safeguarding fiscal sustainability. This necessitates containing fiscal risks from SOEs, PPPs, and state-guaranteed loans to support a growth-friendly fiscal consolidation once the crisis abates and gradually bring debt towards the authorities’ 65 percent of GDP target. The one-year extension of the PCI should allow the authorities to make progress on ongoing reforms and policies to support the economic recovery and meet their fiscal consolidation and debt objectives.
``Containing financial sector vulnerabilities will be key to safeguarding financial stability, aided by intensified monitoring of credit risk, prudent restructuring, and timely recognition of problem loans. The central bank should continue keeping monetary policy data driven and monitoring price developments amid the uncertain outlook.
``The authorities should keep the momentum with structural reforms for an inclusive recovery, especially to limit the impact of the pandemic on women and children, and to make progress on the Sustainable Development Goals. Their commitment to strengthening fiscal transparency, domestic revenue mobilization, and the monetary policy framework should help in this regard. In addition, measures to deepen financial markets, improve education and health care, sustain the expansion of digital payments, and further financial inclusion should contribute to accelerating the transition to a private sector-led growth.’’
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Table 1. Rwanda: Selected Economic Indicators, 2020–26 |
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2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
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|
Act. |
3rd Rev. |
Proj. |
3rd Rev. |
Proj. |
3rd Rev. |
Proj. |
3rd Rev. |
Proj. |
3rd Rev. |
Proj. |
Proj. |
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(Annual percentage change, unless otherwise indicated) |
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Output and prices |
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|
Real GDP |
-3.4 |
5.7 |
5.1 |
6.8 |
7.0 |
8.0 |
8.1 |
7.5 |
7.5 |
7.5 |
7.5 |
6.1 |
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|
GDP deflator |
8.3 |
2.3 |
1.9 |
4.3 |
5.4 |
5.0 |
5.8 |
5.0 |
5.0 |
5.0 |
5.0 |
5.0 |
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|
CPI (period average) |
7.7 |
2.5 |
2.4 |
4.1 |
4.9 |
5.0 |
5.8 |
5.0 |
5.0 |
5.0 |
5.0 |
5.0 |
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|
CPI (end period) |
3.7 |
2.3 |
3.5 |
5.0 |
5.2 |
5.0 |
6.0 |
5.0 |
5.0 |
5.0 |
5.0 |
5.0 |
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|
Terms of trade (deterioration, -) |
-0.9 |
0.0 |
2.6 |
1.0 |
0.2 |
1.1 |
1.6 |
-0.6 |
-0.6 |
2.3 |
1.7 |
2.3 |
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|
Money and credit |
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|
Broad money (M3) |
18.0 |
12.0 |
10.1 |
13.6 |
13.1 |
22.0 |
17.3 |
14.9 |
14.7 |
12.8 |
12.7 |
11.4 |
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Reserve money |
21.7 |
11.2 |
10.6 |
17.8 |
13.1 |
19.8 |
15.2 |
14.9 |
14.7 |
12.8 |
12.7 |
11.4 |
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|
Credit to non-government sector |
21.8 |
12.6 |
10.0 |
12.1 |
12.7 |
14.0 |
14.6 |
13.7 |
13.3 |
14.0 |
13.5 |
12.7 |
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M3/GDP (percent) |
28.9 |
28.0 |
29.8 |
28.5 |
29.9 |
30.7 |
30.6 |
31.3 |
31.1 |
31.3 |
31.1 |
31.1 |
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(Percent of GDP, unless otherwise indicated) |
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Budgetary central government, FY basis 1 |
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|
Total revenue and grants |
23.3 |
23.7 |
25.0 |
23.2 |
24.2 |
23.4 |
24.4 |
23.3 |
24.6 |
23.6 |
24.8 |
25.1 |
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|
of which : tax revenue |
16.2 |
15.5 |
16.0 |
15.4 |
15.9 |
15.5 |
16.4 |
15.7 |
16.8 |
16.0 |
17.0 |
17.5 |
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of which : non-tax revenue |
2.6 |
2.3 |
3.3 |
2.4 |
2.8 |
2.4 |
2.7 |
2.5 |
2.7 |
2.6 |
2.7 |
2.7 |
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of which : grants |
4.5 |
5.8 |
5.7 |
5.4 |
5.5 |
5.5 |
5.4 |
5.1 |
5.2 |
2.8 |
5.2 |
4.9 |
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|
Expenditure |
32.4 |
32.2 |
34.2 |
30.9 |
32.8 |
29.9 |
32.0 |
28.4 |
29.7 |
27.4 |
28.8 |
28.1 |
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|
Current |
16.0 |
14.8 |
15.9 |
16.3 |
15.4 |
15.5 |
15.7 |
14.2 |
14.5 |
13.5 |
14.6 |
14.4 |
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|
Capital |
12.7 |
12.8 |
14.5 |
11.5 |
12.3 |
11.5 |
12.4 |
11.2 |
11.9 |
11.0 |
12.3 |
11.9 |
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|
Lending minus repayment |
3.7 |
4.5 |
3.8 |
3.1 |
5.1 |
3.0 |
3.8 |
3.0 |
3.3 |
1.5 |
2.0 |
1.8 |
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|
Primary balance |
-7.6 |
-6.6 |
-7.6 |
-5.9 |
-6.3 |
-4.8 |
-5.2 |
-3.7 |
-2.9 |
-2.5 |
-1.9 |
-1.1 |
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|
Overall balance |
-9.1 |
-8.5 |
-9.2 |
-7.7 |
-8.6 |
-6.5 |
-7.5 |
-5.1 |
-5.1 |
-3.8 |
-4.0 |
-3.0 |
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|
excluding grants |
-13.6 |
-14.3 |
-14.9 |
-13.1 |
-14.1 |
-12.0 |
-12.9 |
-10.2 |
-10.3 |
-8.8 |
-9.2 |
-7.8 |
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|
Debt-creating overall bal. (excl. PKO) 2 |
-7.7 |
-8.6 |
-9.2 |
-7.0 |
-8.6 |
-6.3 |
-7.5 |
-5.1 |
-5.1 |
-3.8 |
-4.0 |
-3.0 |
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|
Net domestic borrowing |
-0.6 |
2.1 |
-0.4 |
1.8 |
4.0 |
1.5 |
1.3 |
1.4 |
0.5 |
0.7 |
0.0 |
-0.2 |
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|
Public debt |
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|
Total public debt incl. guarantees |
71.3 |
71.1 |
79.1 |
73.7 |
81.3 |
73.3 |
81.1 |
72.0 |
79.5 |
70.0 |
76.5 |
74.0 |
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of which : external public debt |
55.3 |
58.4 |
63.0 |
60.7 |
66.8 |
61.0 |
68.7 |
61.1 |
68.7 |
60.8 |
67.9 |
65.9 |
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|
PV of total public debt incl. guarantees |
51.0 |
48.8 |
55.7 |
50.6 |
56.7 |
50.9 |
56.5 |
50.4 |
55.5 |
49.3 |
53.4 |
51.9 |
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|
Investment and savings |
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|
Investment |
24.5 |
22.6 |
24.2 |
26.4 |
26.8 |
28.2 |
28.8 |
28.4 |
28.7 |
27.9 |
29.0 |
26.9 |
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|
Government |
14.2 |
12.2 |
13.8 |
11.5 |
12.1 |
11.4 |
12.1 |
11.5 |
12.0 |
10.9 |
12.2 |
10.2 |
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|
Nongovernment |
10.4 |
10.4 |
10.4 |
14.8 |
14.7 |
16.8 |
16.7 |
16.9 |
16.7 |
17.0 |
16.7 |
16.7 |
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|
Savings |
9.5 |
6.1 |
6.5 |
10.9 |
10.3 |
14.0 |
13.8 |
15.5 |
15.3 |
16.5 |
17.5 |
17.4 |
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|
Government |
3.1 |
2.6 |
-0.1 |
2.0 |
0.4 |
3.0 |
1.9 |
4.4 |
2.8 |
5.6 |
3.7 |
3.3 |
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|
Nongovernment |
6.4 |
3.5 |
6.5 |
8.8 |
9.9 |
11.0 |
11.8 |
11.1 |
12.5 |
11.0 |
13.8 |
14.1 |
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|
External sector |
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|
Exports (goods and services) |
18.7 |
22.7 |
22.3 |
26.2 |
25.7 |
26.8 |
27.7 |
27.7 |
29.5 |
27.9 |
31.0 |
30.8 |
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Imports (goods and services) |
35.1 |
39.8 |
41.2 |
42.3 |
43.4 |
41.7 |
43.9 |
41.1 |
44.3 |
39.8 |
43.7 |
41.7 |
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|
Current account balance (incl grants) |
-12.2 |
-12.5 |
-13.4 |
-11.4 |
-12.2 |
-9.6 |
-11.2 |
-8.4 |
-9.6 |
-8.0 |
-7.5 |
-6.8 |
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|
Current account balance (excl grants) |
-15.0 |
-16.5 |
-17.8 |
-15.5 |
-16.5 |
-14.2 |
-15.0 |
-12.8 |
-13.5 |
-11.4 |
-11.5 |
-9.6 |
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|
Current account balance (excl. large proj.) |
-11.8 |
-11.0 |
-10.7 |
-9.6 |
-9.5 |
-7.1 |
-8.6 |
-6.3 |
-7.6 |
… |
-6.3 |
-6.8 |
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|
Gross international reserves |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
In millions of US$ |
1,780 |
1,463 |
1,709 |
1,556 |
1,682 |
1,654 |
1,653 |
1,834 |
1,800 |
1,921 |
1,899 |
1,995 |
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|
In months of next year's imports 2 |
6.0 |
4.3 |
5.1 |
4.2 |
4.5 |
4.1 |
4.0 |
4.2 |
4.1 |
4.2 |
4.2 |
4.0 |
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|
Memorandum items |
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|
GDP at current market prices |
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|
Rwanda francs (billion), CY basis |
9,746 |
10,641 |
10,438 |
11,862 |
11,772 |
13,449 |
13,463 |
15,184 |
15,207 |
17,129 |
17,163 |
19,119 |
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|
Rwanda francs (billion), FY basis 1 |
9,402 |
10,241 |
10,092 |
11,251 |
11,105 |
12,655 |
12,617 |
14,317 |
14,335 |
16,157 |
16,185 |
18,141 |
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|
Population (million) |
12.7 |
13.0 |
13.0 |
13.3 |
13.3 |
13.6 |
13.6 |
13.9 |
13.9 |
14.2 |
14.2 |
14.2 |
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Sources: Rwandan authorities and IMF staff estimates. 1 From FY 19/20 (2020) to FY 25/26 (2026). Fiscal year runs from July to June. 2 Overall deficit excl. spending on materialized contingent liabilities and other items already incl. in the DSA. 3 Based on prospective import of goods (excluding gold) and services. |
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[1] The PCI is available to all IMF members that do not need Fund financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors.
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MEDIA RELATIONS
PRESS OFFICER: Meera Louis
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