- The Executive Board of the International Monetary Fund (IMF) has approved Rwanda for a further disbursement under the three-year Poverty Reduction and Growth Facility (PRGF), with the country given an immediate access to at least US$ 1.8 million.
“The completion of the review enables the immediate disbursement of SDR 1.17 million (about US$ 1.8 million), bringing the total amount disbursed under the program to SDR 8.01 million (US$12.4 million),” said the IMF in a statement.
The statement also said the IMF Board also approved Rwanda’s request for four waivers regarding nonobservance of performance criteria related to guaranteeing of new non-concessional external debt with original maturity of more than one year, and the modification of multiple currency practices.
Murilo Portugal, IMF’s Deputy Managing Director and Acting Chairman, stated that the Rwandan authorities are to be commended for the satisfactory implementation of their program supported by the PRGF arrangement, notwithstanding an increasingly difficult external environment.
“Macroeconomic stability has strengthened, and important strides were made in establishing the base for sustained growth and further poverty reduction. Since early 2009, the global crisis has resulted in a fall in export revenue and a slowdown in economic activity. The policy responses to these challenges have been broadly appropriate, including increased fiscal spending and an easing of the monetary policy stance,” he observed.
For the 2009/10 fiscal year, Mr Portugal said the main challenge for Rwanda will be to cushion the impact of the global economic crisis while preserving fiscal and external sustainability.
“The fiscal programme envisages a moderate stimulus to minimise the adverse effects of the economic slowdown. The higher budget deficit will be financed by withdrawing government deposits at the central bank. Gradual fiscal consolidation over the medium term should focus on increasing public revenues while safeguarding priority spending,” he said.
He further the country’s monetary programme will aim to balance the objectives of achieving single digit inflation while providing sufficient liquidity to the banking system, adding that a limited transfer of government deposits from the central bank to commercial banks will help sustain long-term credit in the second half of 2009.
Looking ahead, the IMF calls for a more proactive use of available monetary policy instruments, including interest rate and exchange rate flexibility, which it says would strengthen the effectiveness of monetary policy and support the long-term sustainability of the balance of payments.
“The authorities’ structural reform agenda is expected to further improve public services delivery. The planned reforms in public financial management and revenue administration are encouraging. Implementation of the financial sector reform programme, including strengthened supervision and improved risk management by the banks, will support financial deepening,” said Mr Portugal in his statement.
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