The International Monetary Fund (IMF) has approved a $319 million (approx. Rwf342 billion) loan to finance projects tackling climate change in Rwanda.
The funding is secured under the Resilience and Sustainability Facility (RSF), an initiative that aims at helping low-income and vulnerable middle-income IMF members address longer-term structural challenges such as climate change with longer-term, low-cost financing.
The development was initially announced in October when the IMF mission in Rwanda concluded its visit.
The loan is accompanied by a 36-month new Policy Coordination Instrument aimed at supporting the government to build on the progress in macroeconomic, fiscal, and financial reforms to deliver more inclusive, resilient, and sustainable growth.
The RSF program will include the facilitation of green public investment, creating further fiscal space, mitigating financial risks, and strengthening public debt dynamics and prospective balance-of-payments stability.
"Rwanda has become the first African and low-income country to benefit from the Resilience and Sustainability Facility (RSF), a recognition of the country's commitment to strengthen its resilience to climate change," said Bo Li, Deputy Managing Director and Acting Chair of IMF Board.
At the initial announcement, Uzziel Ndagijimana, finance minister, said "This IMF support is a catalytic fund which is expected to trigger more financing from other institutions including the private sector. We are working well with our development partners in this area but also on private financing such as green bonds."
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Rwanda has a climate action plan that will cost US$11 billion (about Rwf11.2 trillion) through 2030. The cost for mitigation measures is estimated at around US$5.7 billion while over US$5.3 billion will go to adaptation priorities.
While resources for Rwanda's climate action plan continue to be mobilised, Ndaijimana disclosed that the remaining gap stands at about US$7 billion of the needed amount.
The IMF noted that authorities should continue strengthening their capacity to manage fiscal risks and adopt more effective and transparent public financial and investment management practices.
"More decisive monetary tightening by the National Bank of Rwanda (NBR) is needed to contain inflationary pressures while ensuring greater exchange rate flexibility remains key for external stability. Continued monitoring of the financial sector to ensure risks remain contained while deepening financial markets and promoting financial inclusion is also important," Li stated.
