News Column

Rwanda's Inclusive Growth Plan Bearing Fruits - WB

July 7, 2014

Peterson Tumwebaze

Rwanda has made a lot of progress in its economic management and structural policies, according to a recent World Bank report.

The country is among the top African nations according to Managing World Bank Economic Policies report, scoring aggregate 3.9 out of six.

The World Bank lead economist and the author of the Country Policy and Institutional Assessment report, Punam Chuhan-Pole, believes that Rwanda could do even better if it focuses on consolidating achievements gained, as well as prioritising investments and expanding its tax base to ensure the economy is self-sustaining.

Chuhan-Pole talked to The New Times' Peterson Tumwebaze about the rating and how Rwanda's improvement augurs for the economy. Excerpts

According to the Country Policy and Institutional Assessment (CPIA) 2013 report, Rwanda performed very well. How can the country build on this performance to be able to achieve its economic objectives?

Rwanda's CPIA has been steadily improving in several areas over the years, but most especially on economic management and structural policies. We have noticed a general improvement in terms of trade facilitation and general economic management policies, which eased the cost of doing trade.

The country has ably managed its GDP-debt ratio, and has good fiscal and monetary policies.

Remember, having a high CPI score does not mean that a country has a high growth rate, but Rwanda has defied the odds. It's also remarkable that poverty levels have drastically reduced, which indicates an all inclusive growth.

This means that Rwanda stands a better chance to access resources from the International Development Association (IDA) in terms of concessional loans and grants to help the country achieve its economic objectives. However, consolidating gains is a huge challenge for most economies in Africa; this is where Rwanda must pay attention to avoid slippages.

What should Rwanda do to reduce its reliance on foreign aid?

Rwanda needs to expand on its tax base and attract more foreign direct investments to reduce reliance on foreign aid.

The country needs to avoid macro-economic imbalances; being able to manage both the fiscal side and current accounts should remain a priority.

Most importantly, Rwanda should continue streamlining procedures and improving trade facilitation to enhance the business climate, which are key to attain sustainable growth.

Africa is exposed to external shocks and price fluctuations, how can Rwanda avoid this situation?

It is important for a country to be able to manage its debt, make good business management polices and remove trade barriers and promote policies that enhance export trade.

What is more surprising is that, in Africa, non-fragile countries have done better than their counterparts outside sub-Saharan Africa despite the 2008 global economic crisis.

Fiscal policies have been quite expansionary across African economies, but Rwanda has better debt policies, especially on reporting and provision of information on debt.

Most African economies have balance of payment problems, where do we go wrong?

Government expenditure across Africa has been rising since 2006 to a tune of 23 per cent to 27 per cent of GDP in 2013. Unfortunately, revenues have not increased to match the expenditure.

In fact, revenues have increased from about 17 per cent in 2006 to 18 per cent in 2013, widening the fiscal deficit gap. This is an area economies like Rwanda should watch closely.

Government debt to GDP has also been rising, but remains modest at about 34 per cent across the continent.

How is Rwanda performing in this area?

Rwanda's government debt to GDP has been increasing from 2007 to date. However, between 2012 and 2013, it increased by about 4 per cent, which is not alarming.

When you look at CPIA vis-À-vis growth and poverty levels across the region; what kind of picture do you get?

Normally, when we compare CPIA with growth rate, there is a fairly strong connection between the two. However, the link is very weak when it is compared with poverty reduction levels. So, it's important that growth leads to poverty reduction and is all inclusive; I believe this is what Rwanda wants to achieve.

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Source: AllAfrica

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