Gov’t gets IMF support to increase domestic revenues

Rwanda is set to benefit from the International Monetary Fund’s (IMF) team of experts who will help identify how best the county can mobilise domestic resources in order to trim aid dependency in the medium term.Treasury is desperately in need of increasing domestic revenues to finance its budget. Bridging the country’s fiscal deficit will also require raising national savings.“With us is a group of five fiscal sector specialists to help government identify tax revenue, tax administration and tax policy to mobilise more savings,” Paulo Drummond, the IMF Mission Chief said on Monday at a news conference called to communicate the resolutions of the 5th review under the Policy Support Instrument (PSI) programme.The PSI programme, a macroeconomic programme supported by the IMF—which doesn’t involve financing, is set to expire in June 29 next year. It was initiated in 2010.The IMF team of experts is also expected to guide government and the IMF discussions in the medium term. “We have tried to help on technical assistance perspective, plan on paper, and collect more information for the minister to take decisions,” said IMF mission chief. While domestic revenues are projected to rise to 14.3 per cent of Gross Domestic Product (GDP) in the fiscal year 2013/2014, it is considered too low compared to some countries in Sub-Saharan Africa. Rwanda’s domestic revenues to GDP ratio is 13.5 per cent compared to an average of 25 per cent in Sub-Saharan Africa, according to Drummond.The IMF commended Rwanda’s economic performance, saying it has been favourable in the midst of a weak global economic environment.However, it cautioned that increasing imports, delays in aid flows and the widening current account have led to emerging fiscal and balance of payment pressures.Rwanda’s imports as of August increased by 15.3 per cent and 25.6 per cent in value and volume respectively, largely on account of soaring shipments of construction materials especially cement.“Economic prospects for 2013 remain favourable, but subject to risk,” a statement from IMF says.Provided the global economic environment doesn’t weaken further and delays in donor flows are limited and temporary, the IMF forecasts suggest Rwanda’s economic growth to be at 7.6 per cent.Government says it is ready to take further measures as needed to maintain macroeconomic stability.In addition to domestic resources and grants, government says it will explore all avenues for concessional financing. Non concessional financing will be the second option.Recently IMF announced that Rwanda will have greater access to credit after easing restrictions on the country’s non-concessional borrowing.Non-concessional loans are provided to IMF members with very strong policies and policy frameworks, mainly through what is termed as stand-by arrangements, flexible credit line and the extended fund facility.Government says it has already agreed to a limit of US$240 million of non concessional borrowing under the PSI.

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Gov’t gets IMF support to increase domestic revenues