Download LTIF_EDPRS - Rwanda Development Partners

Planning for Economic Growth
and Poverty Reduction
Dr. Jean-Francois Ruhashyankiko,
Senior Economic Advisor
Ministry of Finance and Economic Planning
Highlight of presentation
2

Introduction: Rwanda is getting ready to face its challenges

Key question: How to promote further progress in social sectors while
making up for lagging productive sectors?
 Build on leadership articulated in Vision 2020;
 Adopt social & productive sectors as co-priorities for the design of
policies to remove the obstacles on the way to Vision 2020;
 Foster closer ties with Development Partners and implement the Aid
Policy with its stated preference for budget support;
 Seek consensus among all stakeholders for the implementation of
socio-economic policies through MTEF and yearly budgets;
 Ensure broader involvement of local government and the private
sector to sustain long-term investment efforts.

Conclusion: EDPRS will serve as essential guiding document for our
medium-term initiatives.
Introduction
3

Rwanda is among the few sub-Saharan African countries to
experience more than 5% yearly real GDP growth over the last
decade (1996-2005); it was 7.6%!

However, substantial progress in poverty reduction remain
insufficient and more efforts should be placed on social sectors
(education, health and agriculture)

In addition, strong real growth has been ignited but must now be
sustained through support to productive sectors (investments,
trade, industry and services), which suffer important lags
compared to other sub-Saharan African countries

There are two extreme options: EITHER real growth stalls, poverty
persists and private sector remains lagging… OR real growth is
sustained, poverty reduced and private sector booming.
Strong real economic growth…
Average 1996 - 2005
Share of real GDP Real growth rate
Contribution to real
(percent)
(percent)
growth (percent)
Rwandan economy
4
100.0
7.6
7.6
Agriculture
Food crop
Export crop
Coffee
Tea
Others
Livestock, forestry and fisheries
Livestock
Forestry
Fisheries
43.1
34.1
3.7
2.3
1.4
0.0
5.4
2.4
2.6
0.5
5.6
5.7
-0.1
8.3
0.9
30.2
9.8
3.2
3.3
3.0
2.4
2.0
0.2
0.2
0.0
0.0
0.1
0.1
0.1
0.0
Industry
Mining
Manufacturing
Utilities
Construction and public works
16.8
0.7
7.1
0.9
8.0
12.1
52.5
6.6
8.0
14.5
2.0
0.3
0.5
0.1
1.1
Service
Wholesale and retail trade (commerce)
Tourism
Transport, freight and logistics
Information, communications and technology (ICT)
Financial services
Professional services
Public administration
Education
Health
Community services
37.9
7.8
2.4
4.1
0.9
3.6
6.4
6.8
3.3
1.8
0.8
10.8
7.4
6.7
15.2
15.2
12.9
7.0
10.8
13.9
7.7
6.4
4.1
0.6
0.2
0.6
0.1
0.5
0.7
0.8
0.5
0.1
0.1
…but growth
needs to be
strengthened
and sustained!
High real
growth: 7.6%
Double-digit
growth rates
evidence
strong and
widespread
real growth
Agriculture
and services
are main
contributors to
real growth.
Substantial progress in social sectors…
Selected Vision 2020 Social Indicators
MDGs
Situation
in 1990
Most
recent
Poverty (percent will less than 1 US dollar/day)
G1
50
64
60.3
Children malnutrition (in percent)
G1
30
30
22.4
Land area covered by forest (percent)
G7
12
Literacy level (percent)
48
39.9
Primary school net enrolment (percent)
G2
67
72
93.5
Primary school completion rate (percent)
G2
44
21.8
47
Gender gap in literacy (percent)
G3
12.6
10
7.7
Gender gap in primary education (percent)
G3
10.7
5.6
5.9
Gender gap in secondary education (percent)
G3
1.2
-1.3
1.6
0.3
0.2
0.3
10
47.5
Gender equality in tertiary education (percent of female)
Gender equality in decision-making positions (percent of females)
Gender equality in seats held in parliament (percent of seats)
G3
48.8
Life expectancy (years)
49
51.2
Children immunized against measles (percent of 11-23 month-old)
G4
83
85.6
Under 5 mortality rate (per 1,000 births)
G4
150
72
Infant mortality rate (per 1,000 births)
G4
85
107
86
Maternal mortality rate (per 100,000 births)
G5
1,300
1,071
750
Population in a good hygienic condition (percent)
HIV/AIDS prevalence rate (percent)
5
Situation
in 2000
20
G6
13
3
Malaria-related mortality (percent)
51
Doctors (per 100,000 inhabitants)
1.5
3
16.0
22
2
-
Nurses (per 100,000 inhabitants)
Laboratory technicians (per 100,000 inhabitants)
… but
headline
poverty is
still higher
than in
1990;
hence,
much
remains
to be
done to
achieve
MDGs
and
Vision
2020
targets!
Lagging productive sectors
Rwanda
Average subSahara Africa
(excl. South
Africa)
South Africa
Energy
Electricity consumption (kwh per capita)
Cost of one kwh (in cents of US dollar)
28
0.24
250
0.12
4,467
0.06
Transport
Distance capital to closest port (km)
Freight cost per kilo (inputed in cents of US dollar)
1,156
0.69
222
0.13
469
0.09
Communication
Fixed line and mobile phone subscribers (per 1,000 people)
Cost of one minute local call (in cents of US dollar)
16.4
0.23
87.3
0.18
410.5
0.06
Equity finance
Market capitalization of listed companies (percent of GDP)
Foreign Direct Investment - net inflows (percent of GDP)
0.0
0.15
33.8
3.91
177.5
0.71
Banking finance
Domestic credit to the private sector (percent of GDP)
Commercial banks interest rate spread (percent)
Commercial banks lending rate (percent)
Commercial banks deposit rate (percent)
10.2
10.0
18.0
8.0
28.8
16.1
25.3
9.2
148.5
5.0
15.8
10.8
24.1
57.9
63.5
forthcoming
n/a
58.2
19.0
28.4
68.8
52.7
59.1
58.4
18.0
28.4
70.0
39.0
46.5
Data & etsimates (latest available)
6
Risks
Composite ICRG risk (worse: 0, best: 100)
Institutional investor credit rating (worse: 0, best: 100)
Euromoney country credit worthiness (worse: 0, best: 100)
Low income
countries
Middle
income
countries
Productive
sectors hindered
by access & cost
of energy,
transport, and
communication
as well as
access to
finance
Key question & proposal
How to promote further progress in social sectors while making
up for lagging productive sectors?





7
Build on leadership articulated in Vision 2020;
Adopt social & productive sectors as co-priorities for the design of
policies to remove the obstacles on the way to Vision 2020;
Foster closer ties with Development Partners and implement the
Aid Policy with its stated preference for budget support;
Seek consensus among all stakeholders for the implementation
of socio-economic policies through MTEF and yearly budgets;
Ensure broader involvement of local government and the private
sector to sustain long-term investment efforts.
Leadership articulated in Vision 2020

Vision 2020 is our guide for political, social and economic progress

It serves the same purpose as MDGs, which form a subset of Vision 2020
targets
“Our Vision for Rwanda is a strong and secure nation,
politically stable and accountable at all levels of Government.
At the heart of the nation lies a socially cohesive society
creating equal opportunities for all. Supported by adequate
infrastructure, its people are economically successful,
employed in a modern agriculture or a knowledge-based
economy, and eager to seize opportunities from regional and
international integration.”
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Six Pillars of Vision 2020
9

Build a strong and secure nation anchored in good governance, rule of law,
social inclusion and protection guaranteed by an efficient State;

Empower human resources through improvements in health and education,
as well as skills required to strive in a competitive and entrepreneurial labor
environment;

Construct and extend physical infrastructures to improve transport links,
energy sufficiency, water supply, and ICT networks;

Transform agriculture into a productive, high-value and market-oriented
sector, with forward linkages to other sectors;

Promote investment and trade as well as facilitate the structural
transformation toward industry and services, underpinning the knowledgebased modern economy;

Deepen regional economic integration and international cooperation as
essential mechanisms to ensure the prosperity and credibility of the country.
Eleven obstacles on the way to Vision 2020
Population (need innovative measure to control its growth),
2. Poverty incidence (need pro-poor economic growth),
3. Entrepreneurship (need to provide substantial job creation),
4. Capital formation (need both public/private investments),
5. Structural transformation (need transition to knowledge economy),
6. Land use (need improvements upon subsistence agriculture),
7. Soil erosion and deforestation (need sustainable environment),
8. Export promotion (need to sustain current efforts),
9. Absorptive capacity (need to tackle this major constraint),
10. Competitiveness and doing business environment (need to
promote private sector and regional and international integration),
11. Macroeconomic stability and fiscal discipline (need to be
maintained & sustained).
1.
10
Addressing these obstacles requires

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11
Long-Term Investment
Framework/Portfolio
(LTIF/P)
Longer-term: 2000-2020
Macro direction
Focuses on social and economic
infrastructure development
Considers involvement of private
sector as essential
Builds-in counterfactuals (i.e.,
assess what “would happen if”
investments not carried out)
Promotes performance-based
budgeting (i.e., what spending
“should accomplish”  amounts
are purely indicative)

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



Economic Development and
Poverty Reduction Strategy
(EDPRS)
Medium-term: 2007-2012
Micro foundation
Ensures growth is broad-based &
leads to poverty reduction and
social development
Provides more accurate costing
to help mobilize taxpayers’ and
donors’ contributions
Fosters integration of recurrent
and development budgets
Strengthens performance-based
budgeting through measurable &
measured outputs and outcomes
Fully complementary and EDPRS will serve as essential guiding
document for medium-term initiatives
An insight from LTIF/P: Private sector!


Involving the private sector is crucial because all investments
required to achieve Vision 2020 cannot be funded solely by
taxpayers and donors…
We need to mobilize private savings and provide incentives to
channel them to productive investments:
–
–


12
Mobilizing domestic savings will require substantial progress in the
financial sector development
Mobilizing foreign savings will require further promotion of Foreign
Direct Investments (FDI) and Rwanda’s image abroad
Turning the current private saving-investment deficit into a surplus
will require a strengthening of our investment climate, doingbusiness environment, infrastructure, technical/managerial capacity,
good governance (including continued security, low corruption and
elimination of administrative hurdles and red tape), etc.
Eventually, we expect the bulk of Rwandan investments to be
profitably funded by private investors, rather than taxes and grants!
Involvement of private sector is crucial
40.0
Left bar: Public investments (in percent of GDP)
35.0
Middle bar: Private investments (in percent of GDP)
Right bar: Total investments (in percent of GDP)
in percent of GDP
30.0
25.0
20.0
15.0
10.0
5.0
0.0
13
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Build consensus: Emerging issues in EDPRS
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Raising agricultural productivity
Extending energy and transport infrastructure
Promoting the creation of non-farm employment
Tackling population growth through innovative solutions
Addressing land reform and settlement issue
Improving targeting in social sectors
Increasing focus on gender issues
Investing in children and youth
Maintaining good governance
Sustaining export promotion
Building capacity
…
Caveat: EDPRS conclusions might add further issues to this list…
Build consensus: EDPRS road map
15
1. Evaluation of PRSP 1
Mar-Jul 06
2. Agree high-level objectives
Aug 06
3. Sector mapping exercise
4. Create a logical flow from high
level objectives to specific interventions
in every sector
5. Strengthen tools for
Monitoring and Evaluation
6. Costing sector strategies
Aug-Sep 06
Sep-Oct 06
7. Institutional capacity assessment
Nov-Dec 06
8. Drafting the EDPRS document
Jan-Mar 07
9. Process for “finalisation”
Mar-May 07
Oct-Nov 06
Oct-Nov 06
Conclusion
16

EDPRS will serve as essential guiding document for medium-term
initiatives: 2007-2012.

For that purpose, we are confident that the “final” EDPRS
document will be comprehensive enough and will:
– Be inspired by Vision 2020 and contribute to make progress
towards its targets, which include MDGs
– Incorporate valuable insights from LTIF/P, including a strong
focus on the private sector to sustain investment efforts
– Provide a practical and user-friendly guide for all stakeholders,
at both the national and the local government levels
– Be realistic–yet ambitious–in order to galvanize all efforts of
Development Partners in helping us, in Rwanda, to promote
the prosperity of our people.