The projections follow the institution completing the fourth review of Rwanda’s economic performance under a three-year programme, supported by the IMF’s Policy Support Instrument (PSI).
Following the Executive Board discussion, Min Zhu, Deputy Managing Director and Acting Chair, said growth in 2015 was slightly stronger than expected and inflation remained contained as evenue collection and budget execution were broadly in line with expectations.
However, the growth outlook for 2016–17 had become more uncertain, due to recent declines in international commodity prices.
“These have already reduced Rwanda’s export receipts and, combined with appreciation of the U.S. dollar, has created strong downward pressure on the exchange rate,” said Zhu.
He said authorities should consider contingency plans for further fiscal and monetary adjustment, should the shock persist longer or intensify more than expected.
“Careful monitoring will be needed over the next months to determine whether additional tightening may be needed, including avoiding undue pressure on the exchange rate or depleting reserve buffers. Re-building reserve buffers will be critical to enhance the country’s resilience to future shocks.”
Zhu said over the medium term, policies should remain focused on sustaining high growth through growth-enhancing public investment, encouraging private investment, and diversifying exports.
In addition, reforms to expand access to financial services and deepen financial markets will provide needed capital for private sector-led growth and enable Rwanda’s integration in larger markets within the East African Community, Zhu proposed.
Rwanda, with a population of some 12 million people, is one of the continent’s smaller economies
– CAJ News