VZCZCXYZ0000
PP RUEHWEB

DE RUEHLGB #0348 1591315
ZNR UUUUU ZZH
P 081315Z JUN 09 ZDK
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC PRIORITY 6114
INFO RUEHBS/AMEMBASSY BRUSSELS 0453
RUEHJB/AMEMBASSY BUJUMBURA 0551
RUEHDR/AMEMBASSY DAR ES SALAAM 1365
RUEHKM/AMEMBASSY KAMPALA 2149
RUEHKI/AMEMBASSY KINSHASA 0704
RUEHLO/AMEMBASSY LONDON 0466
RUEHNR/AMEMBASSY NAIROBI 1486
RUEHFR/AMEMBASSY PARIS 0729
RUEHSA/AMEMBASSY PRETORIA 2090

UNCLAS KIGALI 000348 
 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ECON EFIN PREL RW
SUBJECT: IMF CONDUCTS SUCCESSFUL SIXTH REVIEW 
 
¶1.  (SBU) An IMF team successfully concluded its sixth review 
of Rwanda's three-year Poverty Reduction and Growth Facility 
(PRGF) program with a briefing for donor governments on May 
¶29.  The team found Rwanda had met all its 2008 PRGF 
performance targets; some early 2009 fiscal targets were 
missed due to late donor budget support payments.  Robust 
growth of 12.2 percent in 2008 was projected to drop to 5.3 
percent in 2009.  Continued strong growth in the agriculture 
sector will be offset by declining growth in other sectors, 
including construction, mining and services, as the world 
economic downturn makes itself felt in Rwanda.  While falling 
exports are evident, tourism receipts are apparently holding 
up -- a new system for measuring tourism receipts revised 
those figures upwards. 
 
¶2.  (SBU) Inflation, after reaching 22 percent at the end of 
2008, fell to 13.5 percent in April, and could be down to 
single digits by later in the year.  Domestic revenue will be 
negatively affected by declining tax revenues and by East 
African Community (EAC) integration -- and resultant decline 
in tariff revenues -- which however will be partly made up by 
payments from Common Market for Eastern and Southern Africa 
(COMESA) compensation funds.  To help offset projected 
losses, fuel levies will be increased, and various fuel 
subsidies reduced, as well as taxes increased on mobile phone 
air time. 
 
¶3.  (SBU) The IMF team supported an increase in the budget 
deficit in 2009/10 to preserve poverty reduction programs. 
It also accepted a 10 percent salary increase for civil 
servants.  The team expressed some unease concerning a 
proposed USD 30 million Chinese road maintenance loan, which 
does not meet current concessionality requirements (the 
Chinese loan has a 35 percent concessional component, versus 
the PRGF's required 50 percent).  The team sought donor views 
on the impact of this projected loan on their own grant 
funding.  The IMF will also continue discussions on improving 
banking sector liquidity. 
 
¶4.  (SBU) The Government of Rwanda (GOR) seeks a Policy 
Support Instrument (PSI) starting in FY 2010/2011 -- a PSI is 
a more flexible policy framework than a PRGF, offering IMF 
support and endorsement without a borrowing arrangement.  An 
IMF team would send a mission to evaluate this request in 
February or March of 2010, in advance of an IMF Board 
decision in April 2010. 
 
 
 
SIM