Rwanda’s growth projections for 2015 have been revised upward from 6.5 percent to 7 percent. The development comes after completion of the fourth Policy Support Instrument (PSI) review between Rwanda and the International Monetary Fund.
“Economic performance in 2015 has been stronger than expected, with growth in the first half of the year averaging 7.3 percent. Construction and other services performed particularly strongly, while agriculture and manufacturing grew roughly in line with expectations,” The Minister of Finance and Economic Planning, Claver Gatete said.
Meanwhile, consumer price inflation increased in September due to higher food and utility prices and the depreciation of the Rwandan franc against the US dollar, but is forecast to remain below 5 percent for 2015.
“Policy performance through end-June 2015 was consistent with the program framework, with almost all quantitative objectives reached. Significant progress was made on structural reforms, most notably on tax policy and administration. Planned reforms of the regime for agricultural taxes and for publishing quarterly reports on budget execution, however, are taking somewhat longer than originally anticipated,” Ms. Laure Redifer the head of the IMF team said.
Looking forward, the risks to the economic outlook have increased, in light of lower global commodity prices and weaker growth prospects in Rwanda’s main export markets. Mining activity in Rwanda has already been affected, with exports for 2015 and the near term forecast to drop substantially.
This will put pressure on the balance of payments and as a result, economic growth in 2016 is projected to be between 6 and 6.5 percent, compared to 7 percent previously anticipated.
“The mission welcomes the readiness of the authorities to take steps to tighten economic policies in response to the weaker external position and encourages them to continue to exercise exchange rate flexibility. It also welcomes the authorities’ ambitious program of forward-looking structural reforms aimed at strengthening the efficiency of public investment spending; improving tax compliance; broadening the tax base; and reinforcing accountability for budget execution,” Ms. Redifer added.
The IMF’s Executive Board is expected to consider the 4th PSI review in December or January.
PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support.
The PSI helps countries to design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies.
UM– USEKE.RW
