The International Monetary foundation (IMF) in December 1999 assessed Rwanda's economic and financial performance and noted that "the outcomes for real GDP growth and inflation have been better than foreseen, helped by improvements in the security situation, the return and settlement of refugees, and favorable weather. In 1999, mainly because of problems in the transport and manufacturing sectors, real GDP growth slowed down and is now projected at 5%." IMF assessments take note of the difficult security situation (Rwanda's engagement in Congo Kinshasa), noting however, that it does have limited impact on the economy. The IMF commended the Rwandan authorities for maintaining macroeconomic stability, improving fiscal management and transparency, and making progress with structural reforms under the 1998/99 program - despite a difficult security environment and institutional capacity constraints. This had allowed Rwanda to achieve solid economic growth and low inflation. However, noting that difficult challenges remain, the IMF welcomed the authorities' intention to consolidate the recent gains and to deepen the reform effort, laying the basis thereby for sustained reduction of Rwanda's still pervasive poverty. There had been a persistent weaknesses in revenue collection, although the last years have seen a progress in firmly establishing the Rwanda Revenue Authority as an important step in strengthening overall revenue performance, while - in the interest of opening the economy-reducing Rwanda's reliance on trade taxes. The IMF stressed the importance of improving tax and customs administration and accelerating the preparation of the value-added tax. A particular importance was attached to achieving the targeted reductions in defense outlays in 1999 and 2000. These efforts would be crucial to create room for the needed further increases in spending in the social sectors and other priority areas. The need to enhance governance was stressed in the assessment. However, the steps taken to improve budgetary transparency and control were welcomed, and the IMF encouraged the authorities to make the Auditor General's office operational promptly. Rwanda had made much progress in structural reforms, which the IMF saw as vital for achieving sustained and robust growth, especially as Rwanda's recovery from the 1994 war now seemed to be almost complete. The authorities were encouraged to proceed promptly with civil service reform, as well as with restructuring the commercial banks, and strengthening the supervisory capacity of the NBR. The assessment noted Rwanda's significant progress in trade liberalization in recent years, however regretting that revenue considerations had recently led the authorities to introduce temporary import surcharges. It is the authorities' intention to phase them out in the course of 2000. Noting Rwanda's heavy debt burden, Rwanda was considered a strong candidate for debt relief under the enhanced HIPC Initiative in the course of 2000. Enhanced Structural Adjustment Facility Programme (ESAF) The government's medium-term strategy aims at achieving high and sustainable growth and rapid poverty reduction. The macroeconomic objectives of the 1999-2002 period are to achieve annual real GDP growth of 6%, while keeping inflation at or below 3% a year. As output is estimated to recover to its prewar level in the course of 1999, sustained growth from 2000 onward is predicated on a further recovery in private investment and savings in response to structural reforms, a further improvement in confidence, and significant levels of government investment focused on improving human capital and rural infrastructure. To finance the required investment while gradually reducing the reliance on humanitarian aid flows and achieving a sustainable debt position over the medium term, national savings are projected to increase by almost 4 percentage points of GDP during 1999-2002. Under the second-year program, straddling the 1999 and 2000 budgets, improving tax administration and the implementation capacity for social spending will be at the center of fiscal policies. For the year 2000, revenues are projected to improve to 10.7% of GDP. Achieving this target while further liberalizing the trade regime will require considerable efforts on the part of Rwanda to enhance tax and customs administration, including through preshipment inspection of imports, the control of transit trade and smuggling, and accelerated computerization. The major new tax measure foreseen for 2000 is the introduction of a value-added tax, beginning with the coverage of large and medium-sized enterprises from mid-2000 onward. To make further progress on its social objectives, the government envisages significant increases in budget allocations to these sectors over the coming years, with particular emphasis on the training of health workers and teachers, the provision of books, medicines, and other essential supplies, and the establishment of adequate financial mechanisms to promote efficiency at the local levels. In addition to this, the government will be implementing a strategy to reduce poverty, focusing on improving agricultural productivity, promoting small and medium-size enterprises in both rural and urban areas, and encouraging the expansion of the coffee and tea sectors through liberalization and privatization. Some Economic Indicators, 1994-2002
Source:
IMF
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