IMF staff conclude review visit to Rwanda

The International Monetary Fund (IMF) recently conducted discussions with Rwandan authorities on the sixth review of the Economic and Financial Program supported by the IMF's Policy Support Instrument and the first review of policies supported by the Stand-by Credit Facility. The Resident Representative of the IMF, Alun Thomas, shared insights on the mission's findings. In June, amidst global economic challenges such as reduced growth and commodity prices, Rwanda requested a Stand-by Credit Facility to complement the existing PSI agreement. The objective was to address pressures on the economy, specifically related to export receipts and foreign exchange reserves. The IMF implemented policies to manage import demand, including exchange rate depreciation and measures to control domestically financed investment and private sector credit growth. The first review of the program recently concluded, assessing the impact of these policies on the economy. Rwanda has faced challenges in 2016, with declines in sectors like construction, mining, and coffee exports. However, some factors were beyond the government's control, such as global mineral and coffee price pressures. Despite these setbacks, the government has been proactive in diversifying exports and implementing initiatives like the 'Made in Rwanda' campaign to reduce reliance on commodities. Efforts to improve trade relations with neighboring countries like the DRC are also underway. While Rwanda may face competition from regional economic powerhouses like Kenya and Ethiopia in certain markets, it is exploring opportunities in other directions, such as westward trade expansion. The IMF has recommended strategies to mitigate risks associated with turbulent sectors like mining. Import demand moderation remains a key focus to balance Rwanda's export-driven economy. The IMF advocates for measures like exchange rate adjustments, tighter monetary policies, and fiscal prudence to address import vulnerabilities. In the context of energy subsidies, Rwanda's consumer pricing responds to global petroleum trends without significant subsidies. However, subsidies to public enterprises have implications, and the IMF encourages efficiency improvements to reduce such costs. Regarding foreign exchange reserves, recent data indicates a positive trend, with growth in peacekeeping exports contributing to higher reserve levels. Looking ahead, projections show potential improvements in reserves, supported by export activities. Despite short-term uncertainties, Rwanda's economic resilience and proactive policies paint a hopeful picture for future growth and stability.