Despite the government’s efforts to shield the economy from external shocks, the International monetary Fund-IMF says immediate measures need to be implemented to maintain its resilience.
The international finance watchdog says that with export diversification and boosting local production to replace imports thus offsetting the widening trade deficit are critical but need other urgent measures.
“In the near term, more immediate measures are needed to deflate external pressures and stem the drop in foreign exchange reserves,” said Laure Redifer, leader of the watchdog’s visiting team to Rwanda on Tuesday.
She adds, “The mission welcomes, therefore, the authorities’ commitment to implement more cautious monetary policy and postpone some non-priority public spending to help dampen still-strong demand for imports.”
Although it saw its GDP growth by 6.9 percent by end of December, 2015 the country faced a widening trade deficit driven by decline in mineral exports, rising import receipt and a depreciating local currency.
“Allowing the exchange rate to continue to adjust as necessary will be critical in this regard,” she further explained.
John Rwangombwa, the governor of the Central Bank notes that the economy continues to perform above the set projections and notes prudent measures are in place to cushion the economy from external shocks.
“We will continue to implement accommodative monetary policy in 2016,” he said adding that the bank will continue to monitor upcoming economic developments and take appropriate actions.
The team on the other hand welcomed the government’s efforts to implement forward-looking policy reforms in enforcing tax comp boosting domestic revenues as well as streamlining efficiency in public spending.
“The mission commends the authorities for decisive economic policies aimed at safeguarding external sustainability and reinforcing Rwanda’s long-term development potential,” a statement from the team read.
The expert says that this made the economy projected to grow at 6 percent by end of this year susceptible to external shocks but optimistic that the proposed policies are likely to keep economy afloat.