Managing Directors of IMF are supposed to be dull and boring economists obsessed with balancing countries’ books. Not Christine Lagarde. A former finance minister in France, she is a clever political operator. She proved this in her visit to Rwanda, the high mark of which was her speech in Rwandan parliament on January 27, 2015.
Her strategy was simple – first flatter the Rwandan rulers and then hit them hard with gospel truth.
Take this early praise in her speech: “Today Rwanda can take pride in having overcome extraordinary adversity. You are building a resilient and inclusive economy. This parliament is a case in point—more than 60 percent of you are women. This is the world’s highest and more than double the average for parliaments in other countries. I am proud to stand before you!”
Lagarde was only warming up. Here she is with another flattery: “Since the early 2000s, Rwanda has grown at an average of about 8 percent—well above the regional average and on par with emerging Asia. Per capita income has more than trebled, and while poverty is still high—at about 45 percent of the population—the poorest have shared the benefits of growth. This is a remarkable feat.”
And then she hits them below the belt:
“Mobilizing domestic revenues will be critical in creating fiscal space as reliance on aid gradually recedes. At 16 percent of GDP, the tax collection effort is still low compared to peers in Africa, and well below the 25 percent target set by the East African Community.”
In plain language: you guys get serious. You cannot claim success when your economy is driven by aid which remains as high as 15 percent of GDP and 40 percent of your government spending. This is no success story. Low tax collection makes you a lousy performer even by African standards. This means your country hardly has any private sector to tax!
Lagarde gives another blow: “Rwanda has made important strides over the years, such as cutting red tape for construction permits, making it easier to get electricity, and strengthening the legal rights of borrowers and lenders. At 46 out of 189 countries in 2015, Rwanda is now in the top three sub-Saharan performers according to the World Bank Doing Business Indicators. Even so, infrastructure gaps continue to hold back the private sector from flourishing. In particular, key infrastructure projects in transportation, water and energy need to come on stream to unlock its full potential.”
In plain language – your Doing Business indicators are worthless. What good is it to remove red tape for getting electricity when you don’t have electricity, water and roads? You people are not serious. Build these things and only then absence of red tape make sense.
Here goes Lagarde again on the attack: “Equally important for the development of the private sector is the skilling of the labor force to reap the dividends from the demographic transition.”
In plain language – the mismatch in your labour market is denying the private sector badly-needed skills while many young people are unemployed because they have no skills! You risk social unrest because most of your population is young but soon entering the workforce.