November 16, 2021: Rwanda’s Economy could strongly rebound in 2021 helped by sustained fiscal stimulus and an accelerated vaccination rollout, according to projections by International Monetary Fund (IMF).

From October 18th to November 15th, 2021 an IMF mission led by Haimanot Teferra held meetings with various Government officials to consult and discuss the 5th Policy Coordination Instrument (PCI).

In a statement released yesterday, the mission team noted that unprecedented policy support, robust remittances, efforts to step up the vaccination rate, and progress in structural reforms are supporting economic recovery in 2021.

“The current account deficit is projected to remain large in 2021 at 11 percent of GDP. This is driven by a pickup in imports as economic activities resume. While FDI inflows remained subdued as some large investment projects are delayed, gross international reserves stood at 5.5 months of prospective imports at end-September. Over the medium term, the external position is expected to improve through increases in domestic savings, particularly the envisaged fiscal consolidation and productivity growth supported by ongoing structural reforms” The statement read in part.

The mission underscored that fiscal policy is reoriented to be supportive of the promising recovery. It pointed out that fiscal deficit is anticipated to increase to 9.1 percent of GDP in fiscal year 2021–22 reflecting additional spending related to mitigating the pandemic impact and measures such as temporary tax incentives for manufacturing and construction under the Manufacture and Build to Recover Program to fast-track the recovery.

On the monetary policy front, the IMF team encouraged that it should remain data-dependent, guided by inflation expectations, and supportive of the economic recovery. With economic activity rebounding and rising commodity prices, headline inflation is projected to rise towards the target, which supports maintaining the current monetary policy stance.
The team further noted that the banking system continues to be stable, liquid, and well-capitalized.

It encouraged authorities to monitor any buildup of credit risk but identifying effective ways to deal with hard-hit sectors together with targeted support.  Although non-performing loans remain low largely due to policy support and forbearance measures, the IMF team advised continuous intensive monitoring of credit risk and prudent loan classification and provisioning.

To minimize the impact of the pandemic and foster a more durable, inclusive, and resilient growth, the mission recommended sustaining the structural reform agenda which would include stepping up initiatives to attract private financing to address rising post-pandemic development needs and ensure social programs are protected among others.

Read the full IMF mission statement here