Rwanda Economy is Seriously Sick

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The August 2014 World Bank Update confirms what we already know. Rwanda development “success” is mirage. Rwanda’s high growth even “before the aid shock failed to stimulate a signifcant transformation of the economy.” Here are a few revealing statistics from the Update:

1) 73% of Rwandan economy is made of “nontradables” i.e. services/goods used for domestic consumption not comparable to imports or exports;

2) Aid donations as share of Gross National Income (GNI) remained high at 20% in 2011 (neighboring countries rely much less on aid against their GNI: Kenya 7.2%, Tanzania 10.4%, Uganda 10.4%, & Sub-Sahara average 3.4%;

3) Aid donations accounted for 86% of gross fxed capital formation (additions of capital stock such buildings, roads, and other infrastructural assets);

4) Slow credit growth, structural bottlenecks such as the underdeveloped private sector, weak infrastructure, and poor performance in the agricultural sector, undermine economic growth;

So what is in the store for Rwanda in 2014 and 2015, according to the World Bank?

# Growth rates are unlikely to recover to the pre–aid shortfall levels;

# The projected growth rate for 2014 is downgraded from 7.2 percent in the December 2013 edition of the Rwanda Economic Update;

# Downgrading is due to delayed implementations of capital expenditures and a continued slowdown of credit growth to the private sector;

# The growth recovery from 4.7 percent in 2013 is not a sure thing; it will depend on timely implementation of government capital expenditures.

Singapore of Africa is Seriously Sick.

Himbara

David Himbara

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