Dar es Salaam. Rwanda has received $109.4 million funding from the International Monetary Fund (IMF) to support war against Covid-19.
The amount which is equivalent to Tanzania Sh251.62 billion was approved on Thursday, April 2, 2020 by the IMF executive board and would be disbursed through the Rapid Credit Facility (RCF).
The IMF statement issued after the decision says the funds will enable Rwanda to meet its urgent balance of payment demands stemming from the Covid-19 pandemic outbreak.
“The economic impact of Covid-19 is rapidly unfolding, with the near-term outlook deteriorating quickly and give rise to significant fiscal and external financing needs,” reads part of the statement, adding.
“Authorities have acted fast by putting in place measures that help to contain and mitigate the spread of the disease.”
The funds will support authorities’ efforts by backstopping decline of international reserves and provide budget financing for increased spending aimed at containing the disease and mitigate its economic impacts.
Deputy managing director and acting chair, Mr Tao Zhang said Covid-19 pandemic has ground Rwanda’s economy to a halt, creating an urgent balance of payment needs.
He said the government swiftly implemented several measures to contain and mitigate the spread of the virus, thus affecting all sectors of the economy.
According to him, uncertainties surrounding the duration and spread of the pandemic could further intensify the country’s economic fallout.
“The IMF emergency support under RCN will help with Covid-19-related pressures on trade, tourism and foreign exchange reserves. It will provide much-needed resources for health expenditure, households and firms affected by the crisis,” he was quoted as saying.
He added, “A temporary widening of the budget deficit is appropriate to mitigate the health and economic impact of the pandemic. Spending should be well-targeted and cost-effective to not crowd-out other priority areas.”
He suggested that once the crisis decreases, the fiscal adjustment path should be adjusted to preserve debt sustainability in the medium-term, noting that contingency plans should also be prepared at the given uncertain outlook.
According to him, monetary policy needs to be data-driven and that the central bank should be ready to provide additional liquidity support whenever necessary.
However, the statement commends measures undertaken by the National Bank of Rwanda in supporting the country’s financial sector to maintain its health and flexibility, while encouraging prudent loan restructuring and stepping up reporting requirements.
“Additional donor support is critical to close the remaining financing gap, ease the adjustment burden, and preserve Rwanda’s development gains over the last two decades,” reads the statement.