The International Monetary Fund has lauded Rwanda’s fiscal policies, which have propelled the country’s economic recovery from the slowdown experienced in 2012.

The country’s performance was highlighted by the executive board of the in the just completed second review of Rwanda’s economic performance.

IMF noted that the country’s fiscal policies remain prudent and the objectives of the FY2014/15 budget are within reach.

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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 reducing aid dependency, and the authorities should vigorously pursue improvements in revenue administration and tax policy improvements in agriculture, mining and property.

“The Rwandan authorities are to be commended for their strong implementation of the economic programme supported by the policy support instrument carried out against a challenging economic environment. Poverty has declined over time, economic growth has recovered since 2013, and inflation remains contained,” said Naoyuki Shinohara, IMF deputy managing director.

IMF said Rwanda’s strong policies have played a key role in maintaining real gross domestic product growth at 7.8 per cent on average since 2000, with significant poverty reduction.

The economy is recovering from the disruptions induced by aid suspension through mid-2013, with growth bouncing back in the first half of 2014.

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

However, according to experts, more efforts are needed to promote financial deepening and inclusion.

“The government has taken important steps to strengthen Rwanda’s debt management capacity and project implementation, including establishment of a debt management unit. The available room to fund new infrastructure projects and maintain a low risk of debt distress is limited and sensitive to changing economic circumstances,” added Mr Shinohara.

He said this requires consistent and prudent debt management, through use of available concessional financing options, private sector involvement and judicious use of non-concessional borrowing.

Rwanda’s economic growth in 2014 is expected to hit about 6 per cent, rising to the longer-term growth rate of 7.5 per cent in the medium term.

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This reflects improved implementation of government projects and a rebound in agriculture because of favourable climatic conditions early in the year.

Prospects in construction and real estate are also favourable. Inflation is projected at about 3 per cent by end year, converging to the authorities’ target of 5 per cent in the medium term.

Weather conditions and delayed project implementation are, however, expected to hinder growth prospects. A protracted period of slower growth in advanced economies or a decline in commodity prices — minerals and traditional exports — would adversely affect exports.