{Today, Rwanda faces consequences of price volatility of exports, gravely affecting the country’s economic performance. }
In a bid to address the challenge, the government of Rwanda approached International Monetary Fund (IMF) to get a loan intended to support the National Bank of Rwanda in assisting exporters. IMF Executive Board on Wednesday approved to release a loan of USD 204 million (Rwf 160 billion) as a stand-by credit facility (SCF) to enable Rwanda’s economy keep a resilient status on the international market.
According to a statement released by IMF, the loan will help Rwanda in one year and a half to balance its trade and has so far released USD 120 million.
IMF says that the loan is a way of supporting development activities in Rwanda including poverty reduction and building the country’s resilience capacity against the world’s economic instability.
The SCF will complement the authorities’ efforts to address growing external imbalances, by boosting reserves, with a first SDR 72.09 million disbursement (about US$102 million) available immediately. Both near and medium term adjustment policies to position Rwanda’s external position on a sustainable basis will form part of an overall strategy to support growth, support poverty reduction and improve the country’s resilience to future uncertainties in the global economy.
The Executive Board approved the Policy Support Instrument (PSI) for Rwanda on December 2, 2013.
Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“Rwanda’s continued strong performance under the Policy Support Instrument has created a platform for high growth and steady poverty reduction. Growth in 2015 was buoyed by strong construction and services activity, while inflation remained contained.
“Nevertheless, the situation has grown more challenging in recent months due to external shocks related to commodity prices and tighter conditions for private inflows. Combined with the appreciation of the U.S. dollar, these have reduced export receipts and put downward pressure on the exchange rate and official reserves.
“Accordingly, the authorities are taking decisive steps to address external imbalances; first and foremost, through using continued exchange rate flexibility as the principal adjustment tool.This will be supported by tighter fiscal and monetary policies to help curb demand for imports. Implementation of these policies should maintain GDP growth of around 6 percent in both 2016 and 2017, while IMF financing under the Standby Credit Facility will help bolster reserves.The authorities are also accelerating policies to diversify and promote higher value exports, which should help strengthen the country’s medium-term growth prospects and its resilience to future shocks.
“Downside risks to growth and the program remain: for example, should further shocks to commodity prices or regional and weather-related developments materialize additional adjustment policies would need to be put in place rapidly.”
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