- The IMF Executive Board today concluded the fifth review under the Policy Coordination Instrument (PCI). The PCI continues to support Rwanda's reform agenda aimed at maintaining macroeconomic stability, promoting sustainable and inclusive growth, and advancing climate-resilient development.
- Rwanda's economic growth remains among the strongest in sub-Saharan Africa, despite rising fiscal and external pressures linked to large investment projects and reduced concessional financing. Continued fiscal consolidation, supported by stronger domestic revenue mobilization and spending efficiency, is essential to safeguard macroeconomic stability and debt sustainability.
- Program performance under the PCI has been strong. All quantitative targets were met, and most reform commitments were implemented, including in SOE governance, monetary statistics, and digital public financial management. The approval of the comprehensive tax policy package and the rollout of the Global Master Repurchase Agreement were implemented with a delay. Rwanda continues to demonstrate leadership in integrating climate considerations into macroeconomic policy and leveraging institutional reforms to mobilize climate finance.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the fifth review under the Policy Coordination Instrument (PCI) for Rwanda. [1]
Rwanda's economy expanded by 8.9 percent in 2024, driven by a rebound in agriculture and continued strength in the services and construction sectors. Inflation remained within the National Bank of Rwanda's 2–8 percent target band, reflecting tight monetary policy and improved domestic food supply. The current account deficit widened in 2024 due to strong consumer and capital goods imports, but reserves remained adequate at 4.7 months of imports as of end-year.
Going forward, the fiscal position will be under pressure from the large infrastructure investment in the New Kigali International Airport and the expansion of RwandAir, as well as the recent pension reform. Public debt is expected to peak in FY2025/26, with the PCI debt anchor now projected to be reached in 2033. Accelerating domestic revenue mobilization and maintaining a credible fiscal consolidation path are crucial to restoring policy space and ensuring long-term fiscal sustainability. Continued vigilance is also needed to manage risks from SOEs, rising debt service costs, and constrained access to concessional financing.
Monetary policy should remain data-driven to contain inflation and support external adjustment. Exchange rate flexibility will be essential to absorb shocks, while reforms to strengthen FX market functioning should continue. Close oversight of credit expansion—including in the microfinance sector—and improved monitoring of large exposures are important to safeguard financial stability.
Program implementation under the PCI remains strong. All quantitative targets were met and most structural benchmarks for this review were completed, including those on SOE governance, PFM digitalization, and monetary statistics expansion. The remaining two structural benchmarks on the Cabinet approval of the comprehensive tax policy package and the rollout of the Global Master Repurchase Agreement were implemented with a delay. The authorities continue to build on the strong foundation established under the now-completed RSF. Progress on climate-related reforms has remained strong, including efforts to implement a climate budget tagging system, develop green taxonomies, and advance the climate finance agenda. Developing a pipeline of viable, bankable green projects will be essential to fully leverage available resources and sustain momentum.
At the conclusion of the Executive Board's discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:
"Rwanda's economy has demonstrated impressive resilience, recording strong growth supported by robust activity in the services, construction, and agriculture sectors. Inflation has remained within the NBR target range, aided by prudent monetary policy and improved domestic food supply. However, the macroeconomic environment has become more complex due to a need to implement difficult reforms against the background of worsening external conditions, including aid withdrawals and regional tensions.
"Sustaining fiscal consolidation remains vital to preserving macroeconomic stability and ensuring debt sustainability. The recently adopted tax reform package is a welcome step toward broadening the tax base and enhancing equity and efficiency. Continued expenditure rationalization and close monitoring of fiscal risks, particularly from SOEs and the ambitious priority investment project, are essential. The fiscal implications of pension reform and the financing needs for the priority infrastructure project must be carefully managed to maintain fiscal discipline.
"Monetary and financial policies remain focused on stability, but vigilance is warranted. Inflationary pressures from fiscal loosening and tax policy changes may necessitate a tightening of the policy stance. Greater exchange rate flexibility is crucial to support external adjustment and safeguard reserve adequacy. The authorities' efforts to modernize the monetary policy framework and strengthen FX market functioning are welcome. Enhancing risk monitoring, particularly in the microfinance sector, and large exposures, along with building additional capital buffers, will be key to safeguarding financial stability.
"Rwanda continues to advance structural reforms under the PCI, including improvements in SOE governance, public financial management digitalization, and financial sector statistics. Progress on climate-related reforms under the RSF is commendable. Looking ahead, Rwanda's efforts to build a pipeline of bankable green projects and improve climate finance coordination will be instrumental in mobilizing additional resources. Continued commitment to reform and strong engagement with development partners will be critical to sustaining progress and supporting Rwanda's ambitious development agenda."
[1] The PCI arrangement was approved on December 12, 2022.
