The International Monetary Fund (IMF) has approved $109.4 million to help Rwanda address the economic impact of COVID19.
The money, the first COVID-19 emergency funding for an African country, will serve to meet Rwanda’s urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic, according to a statement.
The IMF noted that economic impact of the COVID-19 pandemic is rapidly unfolding, with the near-term outlook deteriorating quickly, giving a rise to significant fiscal and external financing needs.
It acknowledged that Rwandan authorities have acted fast by putting in place measures to help contain and mitigate the spread of the disease.
The funds, according to the IMF will support the authorities’ efforts by backstopping the decline in international reserves and providing financing to the budget for increased spending aimed at containing the epidemic and mitigating its economic impact.
Rwanda Thursday reported two more coronavirus cases, bringing the number to 84.
The IMF said it said it will continue to monitor Rwanda’s situation closely and stands ready to provide policy advice and further support as needed.
“The COVID-19 pandemic has ground Rwanda’s economy to a halt, creating an urgent balance of payments need. To contain and mitigate the spread of the virus, the government swiftly implemented measures that have affected all sectors of the economy. With uncertainties surrounding the duration and spread of the pandemic, the economic fallout could intensify further,” said Tao Zhang, IMF’s Deputy Managing Director and Acting Chair.
“The IMF emergency support under the Rapid Credit Facility will help with COVID19-related pressures on trade, tourism and foreign exchange reserves, and will provide much-needed resources for health expenditure and for households and firms affected by the crisis. It should also help to catalyze donor support. “
According to the IMF, a temporary widening of the budget deficit is appropriate to mitigate the health and economic impact of the pandemic.
It suggested well-targeted and cost-effective spending to not crowd-out other priority areas.
“Once the crisis abates, the fiscal adjustment path should be adjusted to preserve debt sustainability in the medium-term. Contingency plans should be prepared given the uncertain outlook,” Zhang said.
It also said monetary policy needs should be data-driven and the central bank should stand ready to provide additional liquidity support if warranted.
Calling for a flexible exchange rate to be maintained as a shock absorber, the IMF noted that the National Bank of Rwanda has taken various measures to help maintain the health of the financial sector and should continue to show flexibility, while encouraging prudent loan restructuring and stepping up reporting requirements.
“Additional donor support is critical to close the remaining financing gap, ease the adjustment burden, and preserve Rwanda’s development gains over the last two decades.”