Liberation: Tough journey ahead

Against the gains already registered is an array of challenges which policy makers have to grapple with as the economy moves past the 15th anniversary of the Liberation Day, writes Fred Oluoch-Ojiwah To mount a credible recovery campaign in true revolutionary thinking, Rwanda established highly ambitious targets for its future dispensation. Targets for growth and poverty reduction, to be achieved by the year 2020 included moves to raise real per capita income from US$230 to US$900. Plans were also set to reduce the poverty incidence by half. However various forms of challenges have continued to undermine the dreams which have been set out. Key socio-economic challenges Various reports mostly from Rwanda’s development partners have closely looked at some of these challenges. The World Bank’s Country Economic Memorandum (CEM) entitled ‘Toward Sustained Growth and Competitiveness (Volume I):Synthesis and Priority Measures’, which was produced in October 2007 provides the analytical basis for determining which priority interventions are needed to achieve the Government’s long-term goals for growth and poverty reduction, as articulated in the Government’s Vision 2020. CEM reports that two years after those targets were established, Rwanda’s first Poverty Reduction Strategy Paper (PRSP) issued in 2002, projected that GDP growth rates would need to be in the range of 6 to 7% over the long term for those targets to be realized. The CEM further states that ‘the principal sources of growth in the medium-term were to be the primary and manufacturing sectors, with growth of the primary sector projected to start at 5.2% and accelerate over the period, due to improved soil productivity from increased use of agricultural inputs’. The report further states that manufacturing growth was projected to rise sharply to 11.5% based on the expansion of manufacturing capacity in agro-processing, and then slow to a more sustainable level of 7%. To achieve this level of growth, the PRSP focused on six priority areas. This included rural development and agricultural transformation, human development, economic infrastructure, good governance, private sector development and institutional capacity development. Overall economic growth has been strong over the past four years, in line with an upward trend over the past decade. Real GDP growth averaged 10% over the period 1995-2005, and average inflation was maintained at around 10%. Per capita real GDP rose from US$245 in 2000 to US$260 in 2005. However CEM states that ‘since 2002, average growth rates in manufacturing and agriculture have been below the projected targets’. It also adds that improvements in poverty have been marginal, due to a number of factors. Key among them being lack of investment in infrastructure during the recovery and stabilization phase which continue to hamper growth of private sector. Another factor noted by CEM has been lack of investments in capacity building institutions, and within land and water management and within agricultural sector generally. The report had highlighted continued low use of inputs within Agriculture. The redress exercise The PRSP anticipated that growth in the agricultural sector will proceed with progressive commercialization, with ensuing demand for agricultural and non-agricultural goods and services in rural areas, resulting in increasing non-farm employment. The report stated that ‘the slower than expected growth in these sectors had thus highlighted the need to examine sector-specific issues related to agriculture, industry, and services, in order to identify the areas to be tackled as a redress exercise.’ The CEM report says that constraints reported to the planned growth and improved competitiveness formed the key value drivers of this redress. The examination of such gaps became thus very relevant to the redress as the Government was poised to enter the phase of sustained shared growth, with increased emphasis on private sector investment. The analysis that was crafted informed the preparation of the country’s second-generation PRSP. This was appropriately titled the Economic Development and Poverty Reduction Strategy (EDPRS), which has recently been launched. It informed the preparation of a new Country Assistance Strategy (CAS) by the World Bank and other development partners. In addition to the CEM, the Bank has undertaken other analytical work on economic management and growth to inform the EDPRS and the CAS, some in collaboration with other development partners. These covered the areas where shortfalls were recorded against the set plans. Ends