Rwanda

Rwanda has achieved impressive development progress since the 1994 genocide and civil war. It is now consolidating gains in social development and accelerating growth while ensuring that they are broadly shared to mitigate risks to eroding the country’s hard-won political and social stability. Central to Rwanda’s goal is to ensure inclusive development and to provide equitable, efficient and effective pro-poor service delivery, while promoting local development in an environment of good governance. It seeks to foster citizens’ participation and empowerment as well as transparency and upward/downward accountability. Rwanda’s approach to promoting inclusive and stable politics and governance appears to be working. The country is at peace and among the most stable on the continent.

Economy and Development

Rwanda’s long-term development goals are embedded in its Vision 2020 which seeks to transform Rwanda from a low-income agriculture-based economy to a knowledge-based, service-oriented economy by 2020. It envisages real growth of eight percent annually, to be achieved through deepening reforms, including in the business environment, investing in major infrastructure (power, transport, and ICT), increasing agricultural productivity, and investing in skills development needed for economic modernization.

Within this long term vision, the Economic Development and Poverty Reduction Strategy (EDPRS) assign the highest priority to accelerating growth to create employment and generate exports. The strategy is framed around three strategic flagship programs:

Flagship One: Growth

Targets economy-wide improvements in productivity. Its goal is to transform Rwanda’s economy away from subsistence agriculture towards increased commercial agriculture, as well as manufacturing and services.

Flagship Two: Vision 2020 Umurenge Program (VUP)

Focuses on ensuring growth is widely shared by creating economic opportunities for the poorest Rwandans. VUP has three components: public works, credit packages and direct income support.

Flagship Three: Governance

Seeks to strengthen political and economic governance, and build institutions and capacity of the state. It envisages a wide range of reforms to strengthen public sector institutions and capacity and also includes aspects needed to create an attractive business environment including strengthening commercial justice systems, regulatory and administrative frameworks, and promoting principles of good corporate governance.

The government also recognizes the key role of the private sector in accelerating growth and reducing poverty, and is therefore looking for innovative ways to finance its development beyond traditional partners and instruments. It has accordingly been undertaking reforms to improve the business environment and to reduce the cost of doing business. Rwanda was named top performer in the Rwanda Doing Business - 2013 report, among the ten most improved economies in 2013, and ranked third easiest place to do business in Sub-Saharan Africa.

Rwanda’s economy continues to perform strongly, but it still remains vulnerable to aid dependency. Growing at 8 percent in 2012, Rwanda’s economy continued a decade-long period of strong economic growth. The economic expansion was driven by buoyant private sector activity, particularly in the services sector while growth rates in industrial and agricultural sectors decelerated in 2012. Inflation rate fell from 8.3 percent in 2011 to 3.9 percent in 2012.

Rwanda’s fiscal deficit narrowed from 3.7 percent of GDP in FY2010/11 to 1.5 percent in FY2011/12, supported by a noticeable revenue performance. Domestic revenue collection reached 14.4 percent of GDP in FY 2011/12–recording the second highest record in recent history–driven by a good GDP growth performance and administrative reforms that continued to broaden the tax base and helped improve compliance.

Rwanda’s external position worsened in 2012. The current account deficit, including official transfers, has widened following aid delays and enlarged import bill due to rapid increase in non-oil imports values (notably capital goods and raw materials). These imports increases were not offset despite a more than 20 percent expansion in Rwanda’s exports, which was driven by non-traditional products. This has led to a shortage of foreign exchange and a subsequent depreciation of the exchange rate, pushing the Central Bank had to draw down foreign reserves. Gross reserves were reduced to US$ 690 million in February 2013.

Development Challenges

Rwanda’s past economic growth enabled substantial reduction and progress towards reaching Millennium Development goals (MDGs). The strong macroeconomic performance was accompanied by substantial improvements in living standards, as witnessed by the two-thirds drop in child mortality and the attainment of near-universal primary school enrolment. Household consumption grew rapidly, resulting in the poverty headcount falling from 59 percent in 2001 to 45 percent in 2011.

For the next decade a number of key challenges remain.  Rwanda will need, among other things, to maintain its growth momentum achieved in the last decade. This requires enhancing the role of the private sector in the economy and its contribution to development and sustained growth. The private sector is still overwhelmingly informal and plays a limited role in contributing to economic activity. Despite Rwanda’s success in having established a sound investment climate, foreign direct investments remain low. Private sector investment is estimated at 10.9% of GDP, compared to 14.4% in the region in 2010. Poor physical infrastructure and the lack of electricity access and generation are other major constraints to increasing and diversifying exports of goods and services and further enhancing competitiveness. Rwanda also experiences significant capacity and skills gaps in the private sector and across government agencies that play significant roles in establishing the policy environment for private sector development.

Last Updated April 2013 

The World Bank Group’s FY 09-12

The Country Assistance Strategy (CAS) for Rwanda was jointly prepared by the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in an effort to achieve greater synergies and catalyze higher volumes of private resources to support Rwanda’s development. It supports the Government of Rwanda’s Economic Development and Poverty Reduction Strategy (pdf) (EDPRS, 2008-12) and seeks to achieve greater impact through selectivity in line with Rwanda's Government preferences for engagement with the Bank, and to enhance harmonization with other donors. Since the EDPRS was extended by one year, to enable preparation of the new strategy (EDPRS II), the CAS had to be extended, as well. The Bank’s program of support during the fiscal year 13 (FY13) remained broadly in line with the EDPRS objectives. The CAS was framed around two strategic themes:

Promoting Economic Transformation and Growth.

The primary objective is to help Rwanda make progress in activating new drivers of growth that can be sustained over time. The substantial part of the financial envelope over the period thus focuses on the achievement of four key outcomes: raising agricultural production in a sustainable way, improving access to and quality of key economic infrastructure services, improving the environment for private sector development, and strengthening management of public resources at central and local levels.

Reducing Social Vulnerability

A secondary objective is to build on progress to date in the reform of basic service delivery mechanisms and thus to help ensure that the most vulnerable Rwandans also benefit from growth, and to help Rwanda make further progress in building a more stable society. A smaller financial envelope will involve support to the Flagship Vision 2020 Umurenge (village) initiative, reducing vulnerability of Rwandan children and mothers to high rates of mortality and promoting peace and social cohesion through demobilization and reintegration.

A recent Country Assistance Strategy Progress Report shows that the delivery of the planned IDA lending program remains on track overall. A key challenge it identifies is weak implementation capacity in the central administration.

In accordance with the Rwanda Government's division of labor arrangements, the Bank's investment lending is focused on the energy; agriculture; and transport (including ICT) sectors. The portfolio currently comprises 10 projects with net commitments of US$ 380 million. Approximate shares are agriculture (43%), energy (36%), and transport (6%). Other sectors include skills development, private sector development, public sector governance, and demobilization and reintegration. In addition, the World Bank provides budget support each year.

Reflecting the importance of the regional integration agenda, Rwanda is also participating in five regional projects (total commitment US$ 69 million), some 80% of which is focused on regional infrastructure programs and trade facilitation issues.

Partners

A significant percentage of ongoing World Bank-supported projects have mobilized support from other development partners including the Electricity Access Project (Nordic Development Fund, OPEC Fund for International Development, Netherlands), the Second Emergency Demobilization and Reintegration Project (Sweden, Germany, Netherlands), and the Land Husbandry, Water Harvesting and Hillside Irrigation (LWH) Project (USAID, Canada, GAFSP).

Last Updated April 2013

Towards Market Oriented Agriculture

Rwanda’s medium term 2008-2013 Economic Development and Poverty Reduction Strategy (EDPRS) concluded that increasing agricultural productivity and commercializing production would be critical to achieving Rwanda’s vision for structural transformation from subsistence agriculture to a middle income economy. It is in this respect that the World Bank embarked on the investment lending support first using a three phased Adaptable Program Loan, The Rural Sector Support Project  (RSSP) that since 2001 has focused on intensifying production in the marshlands, followed by the Land Husbandry, Water Harvesting and Hillside Irrigation (LWH) Project that started in 2010 and focuses on increasing productivity on hillsides and developing parts of these hillsides for irrigated horticulture production..

Since the beginning of RSSP1 in 2001, over 6,500 hectares of marshlands have been rehabilitated or developed, and nearly 26,000 hectares of hillsides have been sustainably developed. Maize yields have improved from 1.6 tons/ha to nearly five tons/ha; while rice yields have improved from three tons/ha to 6.30 tons/ha; and potato yields have improved from 7 tons/ha to nearly 20 tons/ha. In addition a number of rural infrastructures have been put in place to link productive areas to markets.

 So far, of the 57,000 people who benefited from the first two RSSP series, 42 percent are females as are 48 percent of the 19,828 people who have benefited from the LWH. The impact created by these two programs is creating transformation in rural Rwanda

Results from the 2010-11 household survey clearly indicate that the reported poverty reduction of 11.8% between 2005-06 and 2010-11 and the corresponding more than one million pulled out of poverty are mainly attributed in part to improved agriculture production, increased number of agro businesses and increased farm wage employment.

Expanded Access to Electricity

The World Bank supported Urgent Electricity Rehabilitation Project focused on helping improve Rwanda’s electricity generation capacities. Accordingly, the 20 MW Heavy Fuel Power Plant in Jabana, became operational in May 2009. This plant, together with other domestic and regional hydro plants, constitute the back-bone of the Rwandan electricity supply and has enabled the government to eliminate load shedding and phase-out part of the rental diesel generators with maintained supply quality.

This was followed by support for an electricity rollout program the Rwanda’s Electricity Access Rollout Program (EARP) whose objective is to increase the number of households connected to the electricity grid to 350,000 by 2013 from the initial 110,000 in 2009. The number of customers so far connected has increased to about 332 000 households by December 2012   , the third  year of the program implementation. The electrification program helped to bring benefits in rural areas such as improved lighting thereby extending the number of working hours and reduced spoilage of fresh products due to availability of refrigeration and cooling.

Rural electrification also greatly contributed to improved service delivery, especially in health, education and administrative services with new services such as vaccinations and improved laboratory tests that were not possible earlier.  “Before we got electricity, maternity activities were carried out in the dark, now that we have permanent electricity, all machines are functioning well and the lab is operating perfectly” said Mukabadege Speciose Deputy Director of the Nyange Health Center ,

Emphasis is now returning to increasing generation capacity. The Sustainable Energy Development Project provides advisory and technical support, including micro hydropower feasibility studies, International Finance Corporation (IFC) has provided loans to the private developers, and Multilateral Investment Guarantee Agency (MIGA) has provided a guarantee to the 25MW Kivuwatt methane plant.

Strengthening National Social Protection System to Cushion Vulnerable Families from Shocks.

Through the Support to Social Protection System (SSPS) series of operations and drawing on lesson from its predecessor, the Community Living Standards series, the World Bank   has helped to expand the Vision 2020 Umurenge Program (VUP), the Government’s main safety net program, to cover 43 percent of the country’s 416 geographical sectors in 2012, up from just 7 percent when it was launched in 2008. The number of poor people benefiting from the program has grown from less than 10,000 to over half a million in the same period. In addition, the SSPS operations have been critical to helping Government enhance the effectiveness and increase coverage of its overall social protection systems by supporting establishment and improvement of key areas like the impact evaluation, targeting effectiveness, the management information system and the harmonization and coordination of the main programs.

The SSPS program expansion is also gender sensitive consistent with the Government policy on family and gender promotion. Under the VUP, 68 percent of households which benefit from cash transfers are women headed households while 46 percent of participants in public works are women.

Last Updated April 2013