Findings of the eighth edition of the World Bank’s annual economic up-date on Rwanda will be unveiled today in Kigali at a function expected to be attended by senior government officials and development partners. The Rwanda Economic Update (REU) basically analyses recent regional and global economic developments and places their likely impact in the medium and long term, in Rwanda’s context. World Bank’s country manager Carolyn Turk will unveil this year’s update under the theme; “Financing development: the role of a deeper and more diversified financial sector.” Policy makers, business leaders and other market participants engaged in Rwanda’s economy are the main target audience of an up-date that attempts to make an analytical contribution to the implementation of the country’s national development strategy. The update is not breaking news; but it provides hints of how the World Bank expects the economy to perform basing on several national, regional and global indicators. Around the same time last year, the REU was unveiled and it projected that growth rate would be at 5.7 per cent; however, actual growth by the end of the year turned out to be 7 per cent. In their defense, the economists behind the up-date including Yoichiro Ishihara, laughed off their misfiring and joked that it’s better to project a lower growth rate and be surprised by more. A sneak-peek into the update reveals that World Bank economists will again issue a message of caution in hopes of being proven wrong again. For instance they believe that although growth recovery in 2014 was certainly good news; the general outlook out there is not entirely bright. The factors behind their reservations are not new; for instance, the update warns that Rwanda’s economic resilience will not be achieved without keeping high investment rates. The country’s current investment model is highly dominated by public investments that are moreover funded by aid; this is unsustainable, the update warns, especially if there’s a drop in aid in the medium and long term. It’s clear that the authors of the up-date still have in mind what happened in 2013 when growth sunk as low as 4.6 per cent after aid flows from development partners were interrupted. Once bitten twice shy; Rwanda’s budget for the 2015/16 fiscal year is banking on about 35 per cent of the resources to come from external sources; but these sources are unpredictable hence justifying the traces of caution in this year’s update. In order to circumvent potential shocks from a disruption of aid, the update calls for a deliberate effort by the government to find alternative sources of development financing to secure future growth. Developing the financial sector, including enhancing capital markets, is seen as one of the best strategies to break free from the current conundrum of dependence of external aid to fund public investments. The REU also explores the impact of oil price decline for the economy in the first few months of 2015 and onward but the possible impacts on Rwanda’s economy are expected to be mainly positive in both the inflation figures and the trade statistics. Leonard Rugwabiza, the Chief Economist at the Ministry of Finance and Economic Planning, will represent the government side to try and respond to the major highlights of the up-date.
