IMF board to decide on Rwanda’s $184.9m fresh funding in December
Ruben Atoyan, IMF team leader (left), talks with John Rwangombwa, Governor of the Central Bank of Rwanda, and Yusuf Murangwa, Minister of Finance and Economic Planning, on October 22, 2024.
The International Monetary fund (IMF) Board is tentatively expected to meet in December to review a report on Rwanda’s performance, under the fund’s three-year economic reform plan, which if approved would lead to immediate disbursement of $184.9 million (SDR 138.55 million) in new financing.
The IMF approved a 36-month Policy Coordination Instrument (PCI) for Kigali in December 2022 to support the government’s economic policy and reform agenda geared towards maintaining macroeconomic stability and fostering more inclusive growth.
The IMF team led by Ruben Atoyan visited Kigali from October 7 to October 20, 2024 and concluded that the government’s macroeconomic policy performance through end-June 2024, remained in line with the programme objectives under the PCI and the Stand-by Credit Facility (SCF) arrangement with all quantitative targets having been met.
Upon completion of the review by the IMF board, Kigali would have access to SDR 71.8 million (equivalent to about $ 95.9 million) under the Resilience and Sustainability Facility (RSF) and SDR 66.75 million (about $ 89 million) under theStand-by Credit Facility (SCF).
“Consideration by the Board is tentatively scheduled for December 2024,” Mr Atoyan said in a statement dated October 22.
“Despite the challenging environment, macroeconomic policy performance through end-June 2024 remained in line with programme objectives under the PCI/SCF arrangement. All quantitative targets were met, and reforms to enhance the transparency of public investments and strengthen FX market functioning are progressing well.”
The IMF staff and the Rwandan authorities particularly reached staff-level agreement on policies needed to complete the fourth reviews of Rwanda’s PCI and programme under the RSF and the second review of the SCF arrangement.
“The authorities’ commitment to implement climate-related reforms under the RSF arrangement remained strong, with measures to implement climate budget tagging, improve the climate resilience of public investment and develop a green taxonomy being on track to be completed in the coming weeks,” said Mr Atoyan.
Economic outlook
The IMF approved an arrangement for Rwanda under the newly RSF in December 2022, for an amount equivalent to $319 million becoming the first African country to secure access to the facility, which was created in the same year (2022), with the aim of helping low-income and vulnerable middle-income IMF members address longer-term structural challenges like climate change with longer-term, low-cost financing.
Disbursements to Rwanda under RSF is dependent on the conclusion of relevant reviews under the 36-month PCI.
RSF provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness, while the SCF provides financial assistance to low-income countries (LICs) with short-term balance of payments needs.
According to the IMF team, Rwanda’s economic outlook continues to be positive, risks remain tilted to the downside but deepening of geopolitical fragmentation, another spike in global energy and food prices, or slowdown in trading partners’ growth could weigh on the outlook and adversely affect the availability of external financing.
“Recurrent shocks in recent years complicated the authorities’ objective to rebuild policy buffers. Fiscal consolidation has been slower than envisaged under the program, failing to halt the continued increase in the public debt-to-GDP ratio, which is expected to reach 80 percent of GDP in 2025,” the fund said
Increased access to concessional financing is welcomed as it creates an opportunity to implement critical reforms but does not substitute for domestic revenue mobilization.”
“However, the development of green projects and lending operations needs to be accelerated. With institutional reforms and a strong project pipeline, additional climate financing can be catalyzed, enhancing the RSF’s impact.”
The Policy Coordination Instrument (PCI) is a non-financing instrument open to all IMF member countries. It enables a closer dialogue with countries and the endorsement of policies by the IMF, which allows them to signal commitment to reforms and to catalyze financing from other sources.
An on-track PCI facilitates quick access to IMF resources should the member experience a balance-of-payments need, subject to normal policies on the use of IMF resources.
