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Rwanda "laying foundations for robust growth"

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afrol News, 15 October - The Rwandan government is hailed for its commitment to lay "the foundations for robust growth" in its economic reforms. Since the end of the war and genocide in 1994, Rwanda had made "substantial progress in rebuilding the country's economic and social infrastructure, despite institutional capacity constraints," according to the IMF. 

The 20 September assessment, published today by the International Monetary Fund (IMF), praises the economic development in Rwanda, set back to being the world's poorest country after the 1994 genocide, but now steadily climbing on the world's human development list. 

Rwanda's GDP was reduced by more than 50 percent in 1994, following the genocide and civil war that paralysed society. The following years, the extreme shock of 1994 was somewhat repaired by strong growth (35.2 percent in 1995, 12.7 percent in 1996 and 13.8 percent in 1997). Over the last four years, Rwandan annual GDP growth has stabilised at around 7 percent.

Rwanda's economic performance has remained strong over the last eight years, the IMF therefore concludes. "Real GDP grew 6.7 percent in 2001, as favourable weather conditions stimulated agricultural output and external transfers, equivalent to 11.5 percent of GDP, spurred manufacturing, construction, and transportation and communication activities."

Helped by larger-than-anticipated foreign aid inflows, the National Bank of Rwanda (NBR) during 2001 even had increased its level of gross reserves to cover 5.7 months of imports of goods and non-factor services. Also the fiscal performance in 2001 was encouraging, with stepped-up efforts in revenue collection. 

The Rwandan government had initiated a number of structural reforms in 2001. Among major achievements mentioned by the IMF report were the development of a system for the monitoring of poverty-reducing spending, the introduction of a value-added tax, the start of weekly foreign exchange auctions of the NBR, and the strengthening of the Office of the Auditor General. 

In 2002, the government's programmed spending includes extraordinary outlays for demobilisation and reintegration of army soldiers and ex-combatants, stepped-up efforts at fiscal decentralisation, and jurisdiction of genocide-related trials. 

In order to accommodate these exceptional expenditures, new revenue measures are being implemented. These include an increase in the value-added tax rate to 18 percent from 15. At the same time, the corporate income tax is being reduced in an effort to harmonise the tax system with neighbouring countries and stimulate investments.

Rwanda's economic program also contains a comprehensive structural reform agenda, including substantial improvements in the administration of public finances, the promotion of governmental transparency and accountability, and the strengthening of the financial sector and its supervision.

The IMF board commended the Rwandan authorities' progress, over the past year, in "laying the foundations for robust growth and poverty reduction under difficult conditions." The IMF cited in this connection the major reintegration effort, the safety nets for survivors of the 1994 genocide, the elections for local government, work on a new constitution, and the training of judges. 

In advising the Rwandan government, the IMF board laid great emphasis on the peace and security situation in the Great Lakes region, urging the authorities "to pursue peace relentlessly." Only in that setting could "critically-needed advances in regional economic integration be realized, and domestic resources in Rwanda be freed for productive use." This would also be critical to attract investors and donors, the IMF concludes.

 

Sources: Based on IMF, Rwandan govt and afrol archives


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