Rwanda: An economy exclusively depending on debts!

View of downtown Kigali, Rwanda

By The Rwandan Economist

Rwanda is a country which is known for its reports which show that its economic growth is among the best in the world. But an objective analysis of the real-life reflects a staggering reality: a country where more than 3.5 million Rwandans or 30% of the population was getting food only once par day before Covic-19, a population of which 38% of children are malnourished, an unemployed youth without any employment policy, a galloping population with more than 500 inhabitants / km2 and without any policy in the matter! Dr. Kayumba Christopher, a politician who has just founded a political party, gives the real picture of this moribund economy that only falsely embellished reports make better in Africa.

The alibi of covid-19

Couldn’t the situation be the consequence of covid-19? With a bit of irony Dr. Kayumba Christopher gives the anecdotal example of a man who comes home and finds that his family has no food. Can our man tell his wife and children that neighboring households do not have food too? Absolutely not! This fatal policy of surrendering and doing nothing and saying that others have the same problems is not good. Surely, covid-19 has made the situation worse, but there are economies that are trying to get out of it, Rwanda just has to imitate them.

Specificity of Rwanda crisis

To well sort out this specificity of Rwandan economy crisis, there is deemed to base on pillars of economic progress.

1)GDP: the Rwandan GDP decreased lowering to 16% while before Rwandan progress was estimated to 5-7% per year;

2)The debt contracted from international funds especially Breton Woods institutions shifted from 58.1 of 2019 to 76.2% at the moment while when this debt exceeds 50 % there is occurring economic crisis; while paradoxically despite these debts, poverty has inexorably increased by 5.1% in this year alone of Covid-19, or 550,000 new poor people. This poverty results in the lack of sufficient food for millions of households: it is estimated that 3.5 million Rwandans no longer eat to satiety and that 38% of children are malnourished. 3)The purchasing power is too low, the middle class of civil servants, like teachers, is struggling because prices have skyrocketed while there is no increase in wages. Children are regularly chased away for lack of school fees; industries suffered losses so that most of them are in deficit; the unemployment increased from 13% to 22% and this unemployment has serious socio-economic repercussions. Some young households are destroyed. A few employers are experiencing lawsuits with suspended employees. For example, the newspaper “Imvaho Nshya” remains with 5 journalists instead of 18, the 13 suspended are on trial against him. The purchasing power is too low, the middle class of civil servants, like teachers, is struggling because prices have skyrocketed while there is no increase in wages. Children are regularly chased away for lack of school fees. From bad to worse, the guarantee fund feed by 100 billion did not change anything on the recurring misery.  

The need of a national debate on the issue

1)There is a very need of a national dialogue which may debate on the crisis

2) Indicators from MINECOFIN establish that the budget was increased by 9.8 % this year and regrettably ministries budgeted for expenses are highly funded than ministries that attract yield. As evidence, the MINECOFIN is firstly ranked to get much money while its tasks are just economic policies which do not bring nothing in terms of income; MINIFRA seconds it and MINAGRI comes at the 6th place; MINICT 16th place while these latter ministries are more productive than the other ones.

Cabinet vs. the expected dialogue

The cabinet policies are the real causes of this crisis to imply that the government badly planned its strategies for poverty reduction and the results are what are appearing in terms of impoverished population suffering of hunger, production sectors in deficit, imbalance of the import-export balance, a more expenditure budget with more expenditure than inputs, all but a few.

Proposed mechanisms

1)there is required that the deciders accept that the crisis is there;

2)the real factors underlying the crisis whereby the higher indebtedness did not reduce the misery but exacerbated it is that that money funded useless expenses instead of productive projects and industrial activities; thus, the report of the auditor general of public finances established that the years 2017-2018 and 2018-2019 amounts embezzled were more than 5 billion of Rwandan Francs respectively; RISA was reported with exceeding assets of 2billions while MINISPORT was in deficit. This leads to concluded that undoubtedly this money was embezzled or the money was spent unnecessarily.

3)As proposal, the debt deserve to fund productive sector instead of relying on recurrent budget. Indeed, the budget submitted to the parliament sets up 49.2 of expenses while productive sectors such as agriculture, industry; investment, all but a few benefits only from 51%

Issue of access to credit

Rwandan banks are reluctant to grant credits to agriculture projects and prioritize construction loans or business loans. This tendency is due to Rwandan policies overlooking agricultural sector giving more value to the development of service, tourism; technology while finally covid-19 scourge occasioned the failure of this option. if the Rwandan policies change in favor of agriculture, even banks will follow and finance this sector.

Regarding the market of those agricultural products, farmers are tasked to produce quality harvest especially

 As natural products are more attracting clients than products acquired with chemical fertilizer; the state has then the duty to avail infrastructures and favorable diplomacy to ease exports.

this political request would not suffer from any hindrance because it aims at national development and there hope that soon or late these proposals will be adopted.

Conclusion

Debt is quite normal for poor countries; what is not good is over-indebtedness like that of the Land of a Thousand Hills, Rwanda which is currently reaching unprecedented proportions. To take a debt of 76.2% of the value of the GDP is to sell the country especially when the achievements are weak. Dr. Kayumba Christopher has analyzed the Rwandan economy well and asks the RPF government for an explanation of the over-indebtedness. He now proposed the reframing of Rwanda’s investment, which should be oriented towards agriculture, which is moreover profitable to citizens and not to the multinationals alone which seem to have bought the country. Even if dialogue on this over-indebtedness and other economic issues is hardly possible, revising the budget so that the development envelope is larger than the current business line is recommended. The RPF must not deceive none, the debts it takes concern all Rwandans and must be used well for the good of all, because as the nation is for all, the debt is also for all!

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