Why IMF raised Rwanda’s economic growth forecast

An aerial view of Kigali Special Economic Zone. Rwanda’s economy is expected to grow at 8.5%. Emmanuel Kwizera.

The International Monetary Fund has revised Rwanda’s economic growth projections to 8.5 per cent from 7.8 per cent.

While winding up their two-week mission in Kigali, officials from IMF said that economic activity in the first half of the year had outpaced expectations with real Gross Domestic Product growing by 10.3 per cent in the first half of the year.


With the second half of the year still fast-paced, the IMF projects that growth will be higher than was projected.


“The uptick in construction reflects both public infrastructure projects and private investment. Growth is expected to remain strong, 8.5 per cent in 2019 and around 8 per cent for the next 2 or 3 years,” Laure Redifer the mission’s chief noted.


Among the major construction projects that she noted had kept growth high include construction of the Kigali Arena, energy and sanitation projects, road construction projects as well as private sector projects such as commercial buildings and residential.

The growth in the first half of the year was driven by the service sector due to growth in the tourism and transport sectors.

The Rwandan economy grew by 8.4 per cent in the first quarter of 2019 and 12.2 per cent from April to June this year largely driven by services, agriculture and industry, according to the National Institute of Statistics of Rwanda.

The IMF said that though inflation has picked up in recent months, which reflects growth in domestic demand but noted that it was still below the Central Bank’s projection of 5 per cent for 2019.

The global financial institution observed that for the 2018/2019 fiscal year, the fiscal deficit was higher than was expected due to the timing of budget support disbursements.

With international commodity prices remaining unstable in the short term consequently affecting the performance of exports, the IMF tipped the government to continue diversifying exports, value addition of exports as well as support to the Made in Rwanda initiative to maintain receipts.

Redifer said that the IMF was satisfied with the implementation of Rwanda’s Policy Consultation Instrument supported programme.

The programme was approved by the IMF Board in June this year and aims to support the implementation of the National Strategy for Transformation. 

The programme works on four pillars; creating budget space for NST implementation, improving fiscal transparency, regaining momentum on domestic revenue mobilisation and support the forward-looking policy framework. 

In regards to risks in the way of growth projections, the IMF said that there were no serious risks for 2019 and cited traditional risks such as weather patterns and international commodity prices instability as risks for 2020.

In 2018, the economy grew by 8.6 per cent surpassing the projected 7.2 per cent.

The growth was attributed to the good performance of key sectors, such as services and agriculture, as well as a rebound, witnessed in such sectors as construction, and wholesale and retail.

Meanwhile, Central Bank’s Chief Economist Prof Thomas Kigabo said that the tourism sector is projected to rake in $405 million this year from about $380 million last year.


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