IMF directs Rwanda's National Bank to raise rates to curb inflation
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- 06 Apr 2023
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The IMF staff and the Rwandan authorities have already reached an agreement on policies needed to complete the initial reviews of the programme paving way for the release of $74.6 million.
The International Monetary Fund (IMF) has directed Rwanda’s National Bank (NBR) to raise interest rates to contain the surging inflationary pressures in the economy ahead of the release of the $74.6 million financing next month.
The funding for budgetary support is part of the country’s Policy Co-ordination Instrument (PCI) programme and the Resilience and Sustainability Facility (RSF) which IMF approved on December 12, 2022.
The IMF staff and the Rwandan authorities have already reached an agreement on policies needed to complete the initial reviews of the programme paving way for the release of RWF81.63 million ($74.6 million) subject to approval by the IMF Executive Board in May. The agreement followed the conclusion of an IMF mission in Rwanda led by Haimanot Teferra from March 22 to April 4 to discuss the first reviews of the PCI programme and RSF.
“Performance under the programme has been strong. All quantitative targets for end of December 2022 have been met and all reform targets under the PCI and reform measures under the RSF envisaged for the first reviews are progressing well and expected to be completed ahead of the executive board discussion,” said Ms Teferra in a statement on Tuesday.
Rwanda economy vulnerable
However, IMF noted that the Rwandan government needs to continue implementing a credible fiscal consolidation plan coupled with a tighter monetary policy stance while allowing for greater exchange rate flexibility in order to ensure a stable macroeconomic environment.
According to the fund, the Rwandan economy remains vulnerable to the shock-prone external environment and the authorities will need to urgently further tighten the fiscal and monetary policies to rebuild policy buffers.“Another spike in global energy and fertiliser prices, a steeper decline in trading partners’ growth or global financial market as well as geopolitical developments that adversely affect the availability of concessional resources will further strain external buffers and limit the policy space to confront development challenges and address climate change,” the fund said. Read More…
