Rwanda has gained access to $262 million (approx. Rwf325 billion) from the International Monetary Fund’s Stand-by Credit Facility (SCF) to help mitigate the balance of payment pressures arising from climate-related shocks.
The development was announced on October 31, during the conclusion of the IMF team mission in Rwanda where they reached a staff-level agreement on the successful implementation of the economic and financial policies.
The policies are required to complete the second review under both the Policy Coordination Instrument (PCI) and the Resilience and Sustainability Facility (RSF). The first reviews took place in April.
This agreement, which is subject to approval by the IMF Executive Board in December 2023, will allow Rwanda to access the first tranche of the overall 14-month financing, including $48.5 million (approx. Rwf59.4 billion) under the RSF and $87.5 million (approx. Rwf 106 billion) under the SCF.
Ruben Atoyan, the IMF Mission lead, noted that Rwanda coped well with overlapping recent shocks, and despite the intensified external and domestic imbalances, macroeconomic policies remained aligned with PCI recommendations.
“Most quantitative targets were met, and reforms to boost domestic revenue mobilisation, advance expenditure rationalisation, enhance fiscal transparency, and strengthen foreign exchange market functioning are progressing well.”
Richard Tusabe, Minister of State in charge of the National Treasury in the Finance Ministry, said the cooperation focuses on addressing the impact of climate change, with an example of floods in the northern part of Rwanda in May that cost more than $400 million (approx. Rwf 490 billion).
He added that they also looked at different instruments that can be leveraged to attract more development partners and ways to boost domestic revenue to build the country’s resilience amidst different economic hurdles.
Similarly, John Rwangombwa, Governor of the National Bank of Rwanda, noted that they agreed on several macroeconomic instruments that help to stabilise the economy.
Going forward, the mission pointed out that increasing imbalances require further recalibration of policies to safeguard macroeconomic and external sustainability.
“Continued fiscal consolidation, proactive and data-driven monetary policy, and further exchange rate adjustment are necessary to rebuild buffers, curb inflation, and improve debt sustainability,” it stated.
It also urged the implementation of tax reforms to broaden the domestic tax base and improve tax compliance, as well as enhanced efficiency of public investments, better targeting of subsidies and transfers, and digital delivery of public services.
SOURCE: NEW TIMES