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Cablegate: Imf Poverty Reduction and Growth Facility

VZCZCXYZ0000
RR RUEHWEB

DE RUEHLGB #0224 0860645
ZNR UUUUU ZZH
R 260645Z MAR 08
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC 5197
INFO RUEHNR/AMEMBASSY NAIROBI 1167
RUEHDR/AMEMBASSY DAR ES SALAAM 1082
RUEHJB/AMEMBASSY BUJUMBURA 0268
RUEHKM/AMEMBASSY KAMPALA 1850
RUEHFR/AMEMBASSY PARIS 0444
RUEHKI/AMEMBASSY KINSHASA 0403
RUEHDS/AMEMBASSY ADDIS ABABA 0160
RUEHLO/AMEMBASSY LONDON 0190

UNCLAS KIGALI 000224

SIPDIS

SIPDIS

DEPARTMENT FOR AF/C
DEPARTMENT PASS USTDA: EEBONG
DEPARTMENT PASS USTR: WJACKSON
DEPARTMENT PASS COMMERCE: RTELCHIN
DEPARTMENT PASS OPIC: BCAMERON
ADDIS FOR LISA BRODEY

E.O. 12958: N/A
TAGS: EFIN ECON PGOV EINV ENRG ETRD EPET BTIO RW
SUBJECT: IMF POVERTY REDUCTION AND GROWTH FACILITY
ARRANGEMENT REVIEW


1. A recent IMF mission concluded a two-week Poverty
Reduction and Growth Facility (PRGF) review with an
overall assessment that Rwanda's economy continues to
perform well, reaching 6 percent Gross Domestic Product
(GDP) growth in 2007. This was the IMF's fourth review
under the three-year arrangement.

2. At a March 18 briefing, the IMF identified the main
challenge for the Rwandan economy as maintenance of
macroeconomic stability and low inflation in the face of
increasing international prices, higher transport costs
of imports and scaling up in government spending. The
review gave special attention to the impact of higher
transport costs for imports and exports, stemming in part
from higher energy prices as well as higher costs
resulting from civil strife in Kenya, through which most
goods transit to and from this land-locked country.
Releasing a portion of Rwanda's strategic oil reserves
helped mitigate the impact of higher energy costs on the
economy, but refueling the stocks could significantly
increase government spending.

3. Additionally, the impact of higher food prices - the
Food and Agriculture Organization reports that last year
the cost of food rose almost 40 percent globally - was
reviewed. A bumper harvest from the just-conclude short-
rains "A" season, estimated at fourteen percent above
last year's harvest, is good news for the Rwandan
consumer. Normally a net food importer, the IMF
indicated this may be the first year for some time that
Rwanda does not have to import basic food stuffs.
Despite transport, energy and food price increases,
inflation declined and remained in single digits by the
end of the year. The IMF team forecasted GDP growth in
2008 between 5.5 percent and 6.5 percent, although
Government's projection is closer to 7 percent. The
review concluded that the economic policy performance was
satisfactory with the GOR's fiscal program broadly on
track, despite an up-tick in the latter part of last
year.

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