The International Monetary Fund (IMF) on May 24 approved a disbursement of $98.6 million (approx. Rwf101 billion) for Rwanda’s Policy Coordination Instrument (PCI) in climate resilience targets.
The Special Drawing Rights (SDR) financing was released after the IMF Executive Board was satisfied with the review of the instrument accompanying the Resilience and Sustainability Facility (RSF), which allocated the country an amount of $319 million in December 2022.
In essence, RSF is an initiative that aims at helping low-income and vulnerable middle-income IMF members address longer-term structural challenges such as climate change with longer-term low-cost financing.
The PCI aims at supporting the government to build on the progress in macroeconomic, fiscal, and financial reforms to deliver more inclusive, resilient, and sustainable growth.
According to the IMF, the reforms emphasise policies to ensure macroeconomic stability and reforms to mitigate pandemic scars and to build socioeconomic resilience to shocks and insure against downside risks.
Kenji Okamura, Acting Chair of the Executive Board, observed that the recent natural disaster in some parts of the country is expected to take a heavy toll on Rwanda’s economy, and it is a testament to the country’s high vulnerability to climate change shocks.
Rwanda is the first country in the sub-Saharan region to benefit from the RSF, being at the forefront of tackling climate change adaptation. In addition, only Barbados, Costa Rica, and Bangladesh have benefited from the facility thus far.
“Pressing ahead, it will be important to advance reforms in green public finance management and climate-focused public investment management with a view to create an enabling environment for attracting climate finance and support private green investment,” Okamura recommended.
The country has a climate action plan that will cost US$11 billion (about Rwf11.2 trillion) through 2030. The cost for mitigation measures is estimated at around US$5.7 billion while over US$5.3 billion will go to adaptation priorities.
If nothing is done in the next decade, it is projected that the negative impact of climate change would take away about five to seven per cent of Rwanda’s GDP.