Rwanda secures $268m IMF funding

Saturday December 16 2023
The International Monetary Fund

The International Monetary Fund logo. PHOTO | OLIVIER DOULIERY | AFP


The International Monetary Fund Executive Board has approved a new 14-month credit facility arrangement for Rwanda worth $268.05 million out of which the country can access $138.84 million immediately.

The agreement falls under the fund’s stand-by credit facility (SCF) and resilience and sustainability facility (RSF).

“The Board’s decisions allow for an immediate disbursement … equivalent to about $49.49 million under the RSF and about $89.35 million under the SCF,” the IMF said in a statement on Thursday.

The fund noted that Rwanda’s economic growth remained robust, but macroeconomic imbalances have intensified, adding that policy space to advance developmental objectives has been constrained by diminished policy buffers and repeated droughts and the severe floods in May 2023.

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Headwinds from the war in Ukraine, tightening of global financial conditions, consecutive weak agricultural seasons, and structural decline of external concessional financing have also put pressure on the level of international reserves.


“The Rwandan authorities are to be commended for their commitment to macroeconomic stability and strong performance under the Policy Coordination Instrument (PCI) and the RSF arrangement, despite compounding shocks including the floods in May 2023,” said Bo Li, IMF’s Deputy Managing Director, and Acting Chair.

“While economic activity remained robust, macroeconomic imbalances have intensified, reducing the room for policy manoeuvre. Implementing an appropriate and carefully calibrated policy mix under the new SCF is key to rebuilding buffers and safeguarding macroeconomic stability.”

The economy registered strong post-pandemic growth but compounding shocks in recent years resulted in internal and external imbalances, while the development needs remain large.

According to the IMF, carefully calibrated fiscal consolidation, proactive and data-driven monetary policy, continued exchange rate flexibility, and sustained progress on development and climate-related reforms are necessary to rebuild buffers, curb inflation, improve debt sustainability, and enhance socioeconomic resilience.

While the recalibrated policy mix is expected to rebuild external buffers, curb inflation, and improve debt sustainability, Rwanda’s growth is likely to moderate from 8.2 percent in 2022 to 6.2 percent and 6.6 percent in 2023 and 2024, respectively, partly related to continued fiscal consolidation and tight monetary and exchange rate policies.

Read: Rwanda maintains policy rate to tame inflation

The balance of risks to the outlook remains tilted to the downside, as further deepening of geopolitical fragmentation, another spike in global energy, food, and fertilizer prices, a steeper decline in trading partners’ growth, or a funding squeeze would weigh on the outlook.

“Despite the challenging environment, macroeconomic policy performance remained broadly in line with program objectives under the PCI. Progress on the climate agenda under the RSF arrangement remains exceptionally strong,” according to the fund.

Rwanda, as part of their commitment to the RSF-supported climate agenda and to fully capitalise on the catalytic effect of the RSF, decided to accelerate the implementation of the originally agreed reform measures and enhance the reform agenda by introducing new measures, including the implementation of an internationally recognised green taxonomy.

“A temporary fiscal relaxation will help cushion the effects of the recent floods, but a decisive and balanced fiscal consolidation remains necessary in the medium-term,” said Mr Li.

“Comprehensive tax reforms and spending rationalization remain essential to help achieve developmental and social objectives, deliver on the ambitious climate agenda, and maintain the debt trajectory on a sustainable footing. Continued efforts to strengthen public financial management and investment frameworks should also remain a priority.”