Rwanda Economy is Seriously Sick

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.


David Himbara