KIGALI, May 15 (Xinhua) -- Rwanda's economy continues to perform well, with growth expected at 6.2 per cent in 2017 compared to 5.9 percent in 2016, the International Monetary Fund (IMF) said Monday.
An IMF staff team, led by Laure Redifer, was in Kigali from May 2 to 15 to conduct 2017 consultations.
"The IMF team anticipates that growth should recover gradually over the course of 2017, owing to good rains and expanding domestic production. Food-driven inflation peaked in early 2017, and should decelerate as food supply constraints recede," IMF said in a statement.
It said Rwanda's external trade deficit was lower than expected in 2016, following a strong pick up in goods and services exports, combined with reduced demand for imports.
Rwanda's trade deficit reduced from 1.6 billion U.S. dollars to 1.5 billion USD in the first 11 months of 2016.
Last year, Rwanda embarked on a campaign dubbed "Made in Rwanda" to promote production and consumption of locally produced goods.
The Rwandan government also created the Export Growth Facility which facilitates export oriented SMEs to access finance through interest subsidies.
Through this fund, exporters access subsidized loans of up to 10 percent interest rate per annum.
Under the Second Economic Development and Poverty Reduction Strategy (EDPRS 2), Rwanda targets an annual exports growth of 28 percent.
The IMF team observed that these developments reflected in part decisive government policies: to address pressures on the balance of payments and falling reserves.
The government allowed the exchange rate to adjust, resulting in depreciation of just under 10 percent in 2016, supported by public spending restraint and prudent monetary policy, according to IMF.
It commended the government for implementing a "Made in Rwanda" policy to encourage domestic production of certain goods currently imported and promote export diversification, intended to foster external stability and growth in the medium term.
"These efforts should allow for a slight increase of foreign exchange reserves in 2017. The IMF team commended these policies, but underlined the importance of balancing tax incentives in Rwanda and domestic revenue mobilization objectives," IMF said.
The IMF team urged accelerated completion of revisions to income and fixed asset tax laws, and further analysis of the effectiveness of various tax incentives in promoting the competitiveness of Rwanda's private sector.
