WB advises Rwanda on macro-economic stability

The World Bank has advised Rwanda to pay more attention to macro-economic stability because the impact of external shocks will be much higher than last year.Yoichiro Ishihara, the senior economist at the World Bank made the remarks yesterday shortly after the launch of the World Bank’s fourth edition of the Rwanda Economic Update report.The survey gives a clear analysis of the recent economic development in Rwanda and its implication on the country’s economy.“The year 2013-2014 predicts positive economic growth progress in Rwanda, but the economy was still vulnerable because the impact of external shocks will be much higher than a year ago,” Ishihara told The New Times.“The bottom line is to ensure strong growth rate in 2013 and recognising some vulnerability because weak economic growth will continue to be the norm in developed countries, with low or negative rates of growth, including in Rwanda’s major bilateral donors.”The economist pointed out that, it was important for the government of Rwanda to focus more on macro-economic stability to contain the impact of external shocks resulting from global economic crisis.According to the report, Rwanda’s economy will grow by 7.0 per cent in 2013 before recovering to 7.5 per cent in 2014. The slowdown in 2013 growth is driven by lower public expenditures associated with the aid reduction during the current fiscal year.“The aid shock has demonstrated not only the government’s prudent macroeconomic management capacity, but also the vulnerability of the economy to the volatility of aid,” noted Ishihara.Due to the growing concerns over financial sector stability, in July 2012, the National Bank of Rwanda created the Financial Stability Committee (FSC) to monitor financial market conditions and risks.The survey recognises the positive and steady economic growth registered by Rwanda in the past few years where the country’s economy grew by 8 per cent in 2012, making it the fastest growing economy in the region.The report states that the strong growth in 2012 is attributed to a resilient private sector performance especially in the services sector with trade, telecommunication and transport generating about 40 per cent of 2012 real GDP growth. The study uses data gathered by the statistics office to examine the reduction in poverty and inequality in Rwanda over the past decade. It takes into account Rwanda’s move to lift one million people out of poverty within the last five years.Poverty reduction The report found that almost half of the reduction in poverty can be attributed to developments in agriculture, especially the increase in agricultural production and the increased commercialisation of agriculture, witnessed by the rising share of harvests that are sold on local markets.The survey also asserts that diversification of livelihoods towards non-farm activities has been an important secondary driver of poverty reduction in Rwanda over the past decade. “While Rwanda has pushed back poverty dramatically in the past decade, it is still one of the world’s poorest countries,” said Carolyn Turk, World Bank Country Manager for Rwanda. “We are happy to continue supporting Rwanda’s efforts to channel its impressive growth into shared prosperity for Rwanda’s citizens.”The reports says: “further increases in agricultural productivity will likely be the main driver for poverty reduction in the decade to come, especially if combined with increased business activity related to the boom in agriculture”.Pichette Kampeta Sayinzoga, the Permanent Secretary in the Ministry of Finance and Economic Planning, and Secretary to the Treasury, said the government was doing what it takes to contain economic external shocks. “We are happy with the report because it corresponds with what we have on the ground. These are not new figures but it’s an analysis of the figures that have been published before. It’s a useful work and it’s very comforting to know that our country is on the right track,” she said.Kampeta stated that, they are focusing on promoting exports, job creation and supporting the growth of the private sector.The report observed that creating an enabling environment, where informal household enterprises can thrive would likely rise rural standards of living and play a significant role in absorbing the rapidly growing labour force. Rwanda increased the national budget from over Rwf1.5trillion in 2012/2013 fiscal year to Rwf1.6 trillion in 2013/2014. The focus is on transforming infrastructure and agriculture sectors.Economic transformation was allocated Rwf459 billion which makes it 28 per cent of the total budget, rural development Rwf164 billion (10 per cent) of the total budget, Productivity and youth employment Rwf163 billion (10 per cent).