30 November 2012

Rwanda: IMF Lauds Rwanda's Economic Growth

The International Monetary Fund has praised Rwanda's economic growth but warned that fiscal policy during the rest of the fiscal year should be carefully executed as budget support delays have led to the postponement of some government spending.

The observations were made during the fifth review under a three-year Policy Support Instrument (PSI) for Rwanda, a programme that began in 2010.

"The Rwandan authorities are to be commended for their satisfactory implementation of the economic program supported by the Policy Support Instrument, carried out against a challenging global economic environment," Naoyuki Shinohara, Deputy Managing Director and Acting Chair said in a press statement.

He saideconomic growth has continued to be strong, inflation remains contained, and poverty has further declined.

According to Shinohara, the government has taken key steps to strengthen debt management capacity, which is critical in the period ahead to continue with prudent management of debt and complete large ongoing investment projects.

"It will also be important to maintain the momentum of structural reforms to improve the business environment, strengthen competitiveness, and broaden the economic base, in order to sustain economic growth and further reduce poverty," Mr. Shinohara added.

IMF believes that strengthening the domestic revenue base and public financial management are important objectives, including reducing aid dependency.

Shinohara said the recommendations of a recent technical assistance mission on tax policy and revenue administration represent a good basis for broadening significantly the tax base.

Recently, the IMF mission brought along a team of five experts who will help government identify how best the county can mobilise domestic resources in order to trim aid dependency in the medium term.

The fiscal sector specialists will also help government identify tax revenue, tax administration and tax policy to mobilise more savings.

Treasury is desperately in need of increasing domestic revenues to finance its budget.

Central Bank Governor Amb.Claver Gatete said the programme helped government to fast track economic progress and mitigate emerging challenges.

"The Programme (PSI) has enhanced our structural reforms in fiscal, monetary policy and on monetary side (exchange rates) and debt management," Gatete said in an interview.

Gatete noted that government has an option for an additional year but that will be decided after the last review in June next year, which is also the last according to the programme.

"We have not missed any of their reviews; thus, we enter the last one on a strong foot and confidence," said Gatete.

The IMF's framework for PSIs is designed for low-income countries that need IMF financial assistance as well as advice, monitoring and endorsement of policies.

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