The International Monetary Fund has said that the acceleration of vaccinations in Rwanda and resumption of economic activities are driving a strong economic rebound. In the latest consultation and review by the IMF released this week, the fund noted the economy was on the recovery path. The fund projected a Gross Domestic Product growth of 10.2 per cent in 2021 and about 7.2 per cent in 2022. The fund noted that additional fiscal spending is expected in the year is expected to further address emerging social needs and to support the recovery. Rwanda’s allocation of Special Drawing Rights equivalent to $219 million, and the Eurobond issuance, equivalent to $620 million, which are expected to help reduce near-term liquidity pressures and in coping with the impact of the pandemic. “Real GDP growth is projected at 10.2 percent in 2021 on the back of a recently accelerated vaccination campaign targeting high-infection areas, the pickup in external demand, continued government support, and base effects from the 3.4 per cent contraction observed in 2020,” the report read in part. The IMF noted that the monetary and fiscal policies remain accommodative while investments and trade are expected to pick up over time further driving economic growth to pre-covid levels. “Over the medium term, growth is projected to gradually converge to the pre-pandemic trend of 7.5 per cent supported by strong Foreign Direct Investment (FDI), continued high public investment, and recovery in trading partner countries. Inflation is projected to move towards the benchmark level and be within the upper bound of the central bank’s tolerance level in 2022, driven by the pickup in domestic activity, global demand, and rising commodity prices,” the Fund noted. Bo Li, Deputy Managing Director of the Executive Board however noted there is need to boost social protection and address Covid-19 related concerns as well as undertake repairs from a recent volcanic eruption. Officials also called on Rwanda to build on the ongoing growth momentum, a stronger-than-expected impact of the fast vaccine rollout in the country as well as globally which could provide an upside risk that would boost confidence and economic activity. “Going forward, it will be important to closely monitor price developments and maintain a data-dependent monetary policy,” the authors further noted. The economic recovery ambitions should however not sideline progress on the Sustainable Development Goals and investing in human capital, to limit pandemic scars and pave the way for a sustainable and inclusive recovery, Li and his team advised.
