The International Monetary Fund (IMF) on Friday concluded the first review of Rwanda’s programme supported by the IMF’s Policy Consultation Instrument (PCI). The institution said Rwandas macroeconomic performance remains strong under the programme. The programme seeks to support the implementation of the National Strategy for Transformation (NST). Macroeconomic performance – the measure of how well the country is meeting its economic targets – usually looks at things like output, employment and inflation. According to the IMF, growth continues to beat expectations, averaging 10.3 per cent in the first half of 2019, on the back of a booming construction sector, robust activity in services, and healthy agricultural output. As a result, the 2019 growth projection was revised up from 7.8 to 8.5 per cent, with strong upside risk – especially given the recently released GDP figures suggesting that the economy grew in double digits in the third quarter. The fiscal deficit in 2018/19 was higher-than-expected due to accelerated implementation of investment spending but remained within the programme limits. This, combined with stronger demand for the capital-goods imports needed for construction, has led to a widening of the current account deficit. Growth should remain strong, at around 8 per cent, over the next 2 to 3 years, the IMF said in a statement. After a period of subdued price pressure, inflation has come back within BNRs and the IMFs targeted range. This, the IMF said, partly reflects stronger domestic demand and dissipating base effects. It says the Central Bank has appropriately set the monetary stance by reducing interest rates at the trough of the inflation cycle in May and has since refrained from further easing as price dynamics reversed. Headline inflation is expected to peak in end-2019 and early-2020 and should subsequently ease toward the mid-point of the authorities’ target band. Looking ahead, the fiscal deficit path is forecasted to adhere to the fiscal rule under the program, the statement reads in part. But it warns the governments plans to finance the NST partly through public borrowing, should continue to be supported by careful debt management. Plans underway Amina Rwakunda (pictured), the Chief Economist at the Ministry of Finance and Economic Planning said during a breakfast meeting with journalists on Friday that there were many plans being pursued by the government. Some of those plans include increasing domestic revenues by boosting the registration of new taxpayers. This could be achieved through innovative schemes and greater use of technology to strengthen tax compliance, which the IMF also suggests can help the country achieve its targets. Rwakunda said much of the growth has been driven by the government but she indicated that a transition to the private sector will sustain it. Much as the government continues to play a critical part in promoting the economy, we need to see the private sector taking over space, she said at the Friedrich Ebert Stiftung (FES) Rwanda organised event. So far, she added, the government is pushing for diversification of agricultural products beyond traditional exports like tea, coffee and minerals. We think investing in cargo is important, and the plans by RwandAir are underway. Rwanda Development Bank (BRD) was also capitalised to facilitate the private sector, she said. IMF also said a successful transition to private sector-led growth and higher productivity will be important for sustaining Rwanda’s high growth while maintaining macroeconomic balances. Progress on identifying and managing potential government liabilities, the international institution says it will be important to ensure that public resources are well protected for use on priority spending.
