World Bank cautions Rwanda on foreign aid cut

While Rwanda would wish to reduce donor funding, the country at least needs to have more sources of revenue to cover the deficit, a World Bank official said on Tuesday.Omowunmi Lapipo, the World Bank’s Country Manager-Rwanda, cautioned against abrupt slash of aid, saying it would destabilise the economy.Rwanda’s recent success in macro economic stability and development projects has enabled the country to finance a bigger percentage of its budget.The World Bank official said for an economy to remain stable, there is need to allow foreign aid inflow along side other sources as a way of cushioning the economy from shocks.“As a developing country, Rwanda needs to take advantages of each source of financing,” she told Business Times.The country has maintained inflation rate in single digits in the region despite global shocks in the Euro Zone that has impacted on many developing nations.Omowunmi advised Rwanda to strengthen other sources of revenue, including mass mobilisation of savings; promote exports that would pump in foreign exchange, and increase productivity before scaling down foreign aid. “Our concern is about diversification area,” she added,Speaking at the second Growth Forum organised by International Growth Centre in Kigali on Tuesday, Professor Ricardo Hausmann, from Harvard University, urged Rwanda to turn away from scarce resources such as land and apes to scalable and competitive activities like manufacturing and business services which will help propel efforts to self reliance.“Rwanda has the most competitive business environment in East Africa as ranked by the World Economic Forum WEF (Global Competitiveness Report) and this puts it at an advantage to host businesses that cater for the regional market,” he said. Central Bank Governor, Claver Gatete notes that after achieving a strong macro economic stance, the government focus is to widen sources of financing, including expanding business that would enhance foreign Direct Investment-FDI. The country’s exports last year grew by 54 percent to US$743.5million. “We are looking at interconnectedness which would help us reduce our terms of doing business,” Gatete told participants.James Musoni, the Minister of Local Government mentioned that Rwanda’s target of becoming a middle income country by 2020 is achievable. “Such a target is not easy, but if we look back at our achievements over the past decade, it should be clear that this is something that is within our reach.”Professor Paul Collier from Oxford University said Rwanda needs to inject more capital into the economy to move towards self sustenance, despite the risks involved.

News

World Bank cautions Rwanda on foreign aid cut