International Monetary Fund (IMF), on December 14, approved the disbursement of $268 million (approx. Rwf333 billion) in Special Drawing Rights (SDR) to support Rwanda’s balance of payments in dealing with climate shocks.

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This is part of the IMF’s Resilience and Sustainability Facility (RSF), which allocated the country an amount of $319 million in December 2022, and first tranche of the overall 14-month financing under Stand-by Credit Facility (SCF).

In essence, RSF is an initiative that aims at helping low-income and vulnerable middle-income IMF members address longer-term structural challenges such as climate change with longer-term low-cost financing.

The PCI aims at supporting the government to build on the progress in macroeconomic, fiscal, and financial reforms to deliver more inclusive, resilient, and sustainable growth.

According to the IMF, the reforms emphasize policies to ensure macroeconomic stability and reforms to mitigate pandemic scars and to build socioeconomic resilience to shocks and insure against downside risks.

While the recalibrated policy mix is expected to rebuild external buffers, curb inflation, and improve debt sustainability, IMF projects growth to moderate from 8.2 percent in 2022 to 6.2 percent and 6.6 percent in 2023 and 2024, respectively, partly related to continued fiscal consolidation and tight monetary and exchange rate policies.

"Despite the challenging environment, macroeconomic policy performance remained broadly in line with program objectives under the PCI. Progress on the climate agenda under the RSF arrangement remains exceptionally strong.”

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Bo Li, Deputy Managing Director, and Acting Board Chair, said that implementing an appropriate and carefully calibrated policy mix under the new Stand-by Credit Facility (SCF) is key to rebuilding buffers and safeguarding macroeconomic stability.

"Rwanda’s commitment to building a resilient and greener economy is commendable and should be sustained. Enhancing social protection programs, improving human capital accumulation, and promoting private sector-led economic diversification will be critical to navigate challenging times and advance living standards.”

Maintaining the momentum on RSF-supported climate-related reforms –including green taxonomy—will help close adaptation gaps and increase resilience to climate-induced shocks, he added.

The board also recommended continued exchange rate flexibility to contain inflationary pressures and preserve external stability, and maintain an appropriately tight monetary policy stance to durably bring inflation back to the target.