October 7, 2022: Rwanda will become the first African country to access funds under the new Resilience and Sustainability Trust (RST) facility, an International Monetary Fund program aimed at helping low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability.
The move was announced at the conclusion of the IMF mission to Rwanda where the IMF team discussed with senior government officials the support under the Resilience and Sustainability (RST) facility and an accompanying new 3-year Policy Coordination Instrument (PCI). The agreement will see Rwandan access up to US$ 310 million highly concessional financing to advance efforts in building resilience against climate change.
Speaking at the conclusion of the IMF Mission, the Minister of Finance and Economic Planning Dr. Uzziel Ndagijimana noted that the Resilience and Sustainability Trust facility will to contribute to Rwanda’s objective of meeting its Rwanda’s Nationally Determined Contributions.
“We hope this Resilience Sustainability Trust facility will be a catalyst to attract additional funding from different sources, be it bilateral and multilateral means, private sector funding or issuance of a green bond,” Minister Ndagijimana said.
The total estimated cost for Rwanda’s identified Nationally Determined Contributions mitigation measures through 2030 is estimated at around 5.7 billion USD, and over 5.3 billion USD for adaptation priorities, representing a combined funding requirement of around 11 billion USD.
The IMF Mission Chief,Haimanot Teferra noted that “The RSF-supported reforms will help the Rwanda advance measures to integrate climate-related considerations in the design of macroeconomic policies and frameworks, enhance climate-related risk management for financial institutions, and strengthen the disaster risk reduction and management framework.
“While Rwanda has a well-advanced climate strategy, it needs to further strengthen its institutions to deliver and monitor its ambitious climate objectives and to mobilize additional resources,” Ms Haimanot Teferra said.
Under the New PCI the IMF and Government agreed that Rwanda’s economy has been staging robust growth despite the unfavorable global environment. GDP growth is expected to grow by 6.8 percent in 2022 from the earlier projected 6% due to strong performances in the first two quarters.
However, the IMF team noted that elevated global commodity prices and subdued domestic food production have pushed up inflation to 15.9 percent in August, prompting the central bank to raise the policy rate to 6 percent. Fiscal performance for FY21/22 was in line with expectations. The financial system continues to be sound, liquid and well capitalized. The exchange rate has remained stable while reserves stood comfortably above 4 months of prospective imports.
“Looking ahead, addressing high inflation, long-term development needs, and emerging climate risks, remain a policy challenge in a highly volatile global environment. Sustaining the economy’s recovery will require a focus on policies to safeguard debt sustainability, increase fiscal and financial resilience to adverse shocks, as well as reforms to mitigate pandemic scarring and raise productivity growth,” The IMF Mission chief pointed out.
Discussions on reform priorities under the PCI focused on strengthening the fiscal framework, sustaining the implementation of a credible and effective forward-looking monetary framework, and mitigating pandemic scars, while building resilience against future shocks to deliver more inclusive, resilient, and sustainable growth.