Rwanda—Taking On the Future, Staying Ahead of the Curve

IMF News, January 27, 2015

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Speech delivered by Christine Lagarde, Managing Director, International Monetary Fund, Kigali, Rwanda, January 27, 2015. As prepared for delivery.
Three thematic anchors using Rwandan dances:
- Intore (victory dance) — stock take of Rwanda’s success within a regional and global context.
- Umuganura (harvest dance) — lessons Rwanda offers peers in Africa and the world.
- Ikinimba — commitment to the future and policy directions for transition to a stronger, more diversified, and more inclusive economy.
Emphasis on homegrown initiatives, inclusiveness, gender empowerment, and partnership with the IMF.

Key findings and context:

IMF co-hosted “Africa Rising” conference in Mozambique brought together officials from 42 African countries.
Many countries in Sub-Saharan Africa expanded at a healthy clip for ten years or more despite the Great Recession.
Rwanda has grown at an average of about 8 percent since the early 2000s.
Per capita income has more than trebled.
Poverty remains high—at about 45 percent of the population.
Sub-Saharan Africa is expected to post close to 5 percent, the region’s world’s second highest growth rate in 2015.

Downside scenarios and risks (enumerated):

Persistently lower oil prices:
- Benefit for oil importers (more household purchasing power, opportunity to reduce energy subsidies).
- Increased external and balance sheet vulnerabilities for oil exporters.
Monetary policy normalization in the United States:
- Even if well-managed and well-communicated, potential negative effects for emerging markets and global financial stability; possible impacts on African economies.
Persistence of geopolitical tensions (Ukraine, the Middle East, and parts of Africa) increasing volatility and vulnerability.

Policy takeaway:

Sustaining growth is a first order priority—reignite where deficient, support where waning.
Sound policy fundamentals are paramount, with country-specific policy specifics.

Macro and social achievements:

Rwanda is described as a dynamic economy with good governance standards; second generation reforms sustained and accelerated growth beyond the post-1994 rebound.
Parliament composition: more than 60 percent of members are women — described as the world’s highest and more than double the average for parliaments in other countries.
Women make up about 30 percent of ministers and half of Supreme Court justices.
Girls have the same access to primary and secondary education as boys; Rwanda is well on its way to achieve the Millennium Development Goal for education.

Fiscal and external resource management (exact figures):

Social spending on health, education and social protection is now about 13 percent of GDP, up from just 4 percent in 1999.
Resources from foreign aid remain at about 15 percent of GDP.
Fiscal space from debt relief was efficiently used to scale up priority spending.

Homegrown inclusive initiatives highlighted:

Legal and institutional frameworks for gender equality (2003 Constitution, laws on land ownership and inheritance).
“Complete farmer” approach to raise agricultural productivity and reduce rural poverty.
Girinka program — the one cow per poor family initiative to combat childhood malnutrition.
Umuganda — monthly civic contribution (last Saturday of every month) fostering social cohesion.
Imihigo — performance commitments to improve governance and service delivery.

Three-pronged future growth model (enumerated priorities):

Mobilize domestic resources to reduce dependency on aid.
- Current tax collection effort is 16 percent of GDP.
- East African Community target is 25 percent.
- IMF engagement: technical assistance and capacity building in revenue administration and collection to broaden the tax base and strengthen administration.
Encourage private sector development to reduce reliance on the public sector.
- Rwanda ranked 46 out of 189 countries in 2015 Doing Business Indicators; in the top three sub-Saharan performers.
- Reforms: cutting red tape for construction permits, easing access to electricity, strengthening legal rights of borrowers and lenders.
- Infrastructure gaps in transportation, water and energy need critical projects to come on stream.
- Financing approach: optimal combinations of financing sources—revenue increases and judicious external borrowing—while preserving debt sustainability.
- Labor force skilling: emphasis shifting beyond primary education to secondary level education to capture demographic dividend.
Harness regional integration to support export diversification and overcome geographic constraints.
- Need to develop vibrant non-agricultural sectors; support household enterprises and small and medium sized businesses through targeted mentoring and access to finance.
- For a land-locked economy, deeper engagement in the East African Community can provide access to larger markets and regional infrastructure projects (power generation and transportation).

IMF role:

Continued financial assistance, policy support programs, and technical assistance to cement gains from macroeconomic stability and to support transitions toward middle income status.
Partnership framed as “Africa partnering” committed in Mozambique and restated for Rwanda.

More than 60 percent (parliament composition: women).
Average growth since early 2000s: about 8 percent.
Poverty: about 45 percent of the population.
Social spending: about 13 percent of GDP, up from just 4 percent in 1999.
Foreign aid: about 15 percent of GDP.
Women: about 30 percent of ministers and half of Supreme Court justices.
Tax collection effort: 16 percent of GDP; East African Community target: 25 percent.
Rwanda Doing Business ranking: 46 out of 189 countries in 2015.
Sub-Saharan Africa growth outlook: close to 5 percent in 2015.

The reforms required to reach middle income status are ambitious but necessary.
Continued focus on inclusive policies, mobilizing domestic revenue, private sector development, regional integration, infrastructure financing, and skill development are central.
The IMF will remain a partner providing financial assistance, policy support, and technical assistance as Rwanda pursues development goals.

Rwanda—Taking On the Future, Staying Ahead of the Curve by Christine Lagarde, Managing Director, International Monetary Fund, January 27, 2015.