Typical street scene in Santa Ana, El Salvador. (Photo: iStock)
IMF Survey : Rwanda’s Inclusive Policies Are Benefiting Nation’s Poorest
December 12, 2014
- Rwanda’s poorest are benefiting strongly from nation’s sustained high growth
- Government plans to promote growth of small, medium-sized businesses
- Transition under way to private sector–led development model
Rwanda’s economic performance since the turn of the century has been remarkable. Strong policies have played a key role in maintaining annual GDP growth at around 8 percent since 2000, IMF staff said in a regular review of the East African nation’s economy.
Brewery in Gisneyi, Rwanda, where government is promoting practical entrepreneurship in businesses (photo: Hereward Holland/Reuters/Newscom)
ECONOMIC HEALTH CHECK
Moreover, the poorest have benefited strongly from the growth performance over this period, with per capita consumption growing faster at the lower end of the distribution of consumption.
IMF staff noted that the Rwandan economy is recovering from a weak agricultural performance and delays in project implementation, with growth bouncing back to 6 percent in 2014 from 4 ½ percent in 2013, and inflation well contained at 3 percent in 2014. The IMF staff report projected growth of about 6 percent in 2015, while inflation is expected to converge next year to the authorities’ target of 5 percent.
The government has been successful in lowering poverty, with the poverty headcount ratio—the number of people below a basic needs poverty line as a proportion of the population—falling from 60 percent to 45 percent between 2000 and 2011. The government has targeted the agricultural sector, employment, and gender in its goal of sharing the fruits of its sustained high growth performance more widely.
Better farm productivity
Policies that have contributed to improved agricultural productivity and output can be grouped into four categories, and many of these are ongoing.
• Improved access to inputs and markets through a government subsidy program for fertilizer and seed and the establishment of regional markets to allow farmers to deliver their products promptly
• Community-based models focused on educating farmers on land use and improving capacity building at the grassroots level
• Private sector engagement through the provisioning of agricultural inputs and auxiliary services such as post-harvest management and better control of seasonal factors
• Financial inclusion through access to finance initiatives run by banks and provision of financial support at the beginning of the season in return for trading output.
Shifting jobs market
Concurrently, the government is targeting the strengthening of the labor market to harness the potential provided by Rwanda’s shifting employment demographics. The transformation of the Rwandan economy has been more rapid than many others on the continent with a larger decline in the share of agriculture in employment.
However, most of the shift in employment has gone into low value–added services with the change in the employment share of industry barely positive. This contrasts with the experience in many low-income Asian countries that have managed to raise their industrial employment share considerably during the transformation process.
With a large demographic surge ahead, the government is developing policies to promote the growth of household enterprises and small and medium-sized businesses. These include
• Skills development through a revamp of the government’s numerous labor training schemes and the introduction of an informal apprenticeship system providing master trainers and craftsmen the tools to transfer hands-on skills;
• Practical entrepreneurship for small and medium-sized businesses through mentoring and coaching by business development advisors and better access to finance and business services; and
• Introduction of sector specialists in all districts, who can pinpoint successful projects and boost the household enterprise sector.
Gender imbalances
There is a strong gender component to the government’s policies. The labor participation rate is similar for men and women, while Rwanda has the world’s highest female participation in the two chambers of parliament, at 53 percent in 2013. Moreover, net attendance rates and completion rates in primary education are higher for girls than for boys.
These outcomes reflect an approach that involves affirmative action to correct gender-related imbalances, gender mainstreaming, and the integration of a gender perspective in policies, activities, and budgets in all sectors.
The government’s Economic Development and Poverty Reduction Strategy for 2013–18 is focused on economic transformation, rural development, and youth employment. Indeed, the authorities hope to attain a poverty rate of 30 percent by the end of the strategy period (see chart). Continued implementation of these policies, as well as a successful transition to a mode of economic development that is led by the private sector, will make sizeable inroads in achieving this ambitious objective.