The International Monetary Fund (IMF) Thursday approved additional funding of US$111.06million to help Rwanda finance its COVID-19 health and economic efforts.
This is the second emergency disbursement for Rwanda since the onset of the pandemic and it is expected to help finance the country’s urgent balance of payments and budget needs.
In April the IMF had approved $109.4 million to help Rwanda address the economic impact of COVID-19.
This brings the total IMF COVID-19 support to Rwanda at $ 220.46 million.
Rwanda’s economic outlook has worsened since the approval of the first funding on April 2, 2020, leading to a further downward revision in the 2020 GDP growth forecast from 5.1 to 2.0 percent due to deepening of the COVID-19 impact, the IMF said in a statement.
The unprecedented spending needs generated by the pandemic, combined with losses of revenues, are putting significant pressures on public finances and compounding the impact of sharp declines of exports and remittances on the balance of payments, said the IMF.
The additional disbursement is therefore expected to provide much needed support for critical COVID-related spending under the government’s Economic Recovery Plan, but further support will be needed from the international community, it said.
“The COVID-19 pandemic continues to severely impact the Rwandan economy. The global and domestic macroeconomic outlook has further deteriorated. Growth projections have been revised down, and revenue losses and spending needs are more than twice the size estimated at the time of the first request,” Tao Zhang, Deputy Managing Director and Acting Chair, said in the statement.
“The policy measures deployed by the authorities to respond to the pandemic and accelerate economic recovery are appropriate. The additional fiscal spending should help mitigate the impact of the pandemic while ensuring that spending is well-targeted and cost-effective so as not to crowd-out other priority areas.”
Zhang underlined that additional financing from the international community remains critical to ease the adjustment burden.
It will also be important to maintain data-driven monetary policy and continue to provide liquidity support to cushion the impact of the pandemic as well as step up supervision to safeguard financial stability, according to Zhang.
“Once the crisis abates, it will be critical to adopt a credible fiscal adjustment path to maintain debt sustainability in the medium-term and preserve Rwanda’s development gains over the last two decades.”