To better appreciate Rwanda’s robust economic growth in the past two decades, one, especially a foreigner, needs to visit the country for firsthand experience.
Christine Lagarde, the managing director of the International Monetary Fund (IMF), did exactly that and experienced an economy whose present and foreseeable future seems to be in robust health in a world currently littered with ailing economies.
Lagarde’s three-day official visit to the country ended yesterday with a courtesy call on vendors at Kimironko Market, possibly to see the impact of inclusive economic policies that she had heard about from various reports about the country’s economic performance.
“During my visit, I must say that what I have seen has exceeded my expectations of Rwanda,” she said.
The IMF chief suggested that policy frameworks and other response mechanisms should be put in place to deal with specific problems affecting each country’s economy through regular diagnostic checks.
Lagarde expressed gratitude that Rwanda was responding well to the Policy Support Instrument (PSI), an IMF advisory tool that helps guide economies to achieve desired goals.
Currently, the world map of 188 countries that work with IMF is full of red-dots, signaling economies that are currently in trouble; huge external debt, high inflation, fiscal drought, poverty, corruption and bad institutional performance and economic policies.
On the same map, there are a few countries whose economies are marked in green; a sign of good health, strong institutions, manageable external debt, good economic policies, transparent and accountable governance.
Rwanda, Lagarde noted, is one of the few in the green zone owing to “good home-grown policies that have paid off.”
“What struck me most about Rwanda is the unrelenting focus on homegrown interventions to make growth more inclusive and improve social services, especially for women and the rural poor,” Lagarde said.
Slow but firm growth
At a news conference on Tuesday, Lagarde was asked whether Rwanda’s 2020 annual growth target of 11.5 per cent is attainable given the current average of 8 per cent and the IMF’s own projections of about 6 per cent.
“Slow but steady growth won’t hurt Rwanda’s ambitions,” she answered.
Finance and Economic Planning minister Claver Gatete agrees. He explained that targets are not rigid and that as long as annual growth averages are within the targeted range over the years, there’s nothing to worry about.
“Growth is not static; it doesn’t mean that if we attain 11.5 per cent growth, we stop there, it can rise or fall depending on what’s happening at the time,” he said.
Gatete noted that economic growth is not an end itself; it should translate into increased private sector investment, job creation and higher incomes to support domestic consumption.
For instance, the leaders of China have decided to decelerate growth to around 7 per cent this year, the lowest in 11 years, but one they feel is firmer and more sustainable to achieve other targets such as job creation.
Lagarde’s visit came at a time Rwanda’s economy is recovering from the 4.6 per cent slump in 2013 after it averaged a 7 per cent growth in the first three quarters of last year, better than the projected 6 per cent.
Lagarde was also asked what the weak growth in Europe and Asia could mean to an economy like Rwanda’s that looks to those regions as lucrative markets for her exports as well as source of foreign direct investment.
For instance, the European Central Bank recently decided it will be releasing at least Euros 60 billion every month, starting March, to boost growth in a region that’s on the brink of another recession.
Could this trickle down to Rwanda? It might, says the IMF boss. That will depend on the investment decisions of European firms.
“It’s a matter of where they decide to invest, at home or far from home but what I know is that African economies, including Rwanda, remain attractive to investors in Europe,” she said.
Minister Gatete also notes that releasing money into the European economy will help the global economy avoid stagnation.
However, Lagarde encouraged Rwanda to invest in critical sectors such as the Northern Corridor infrastructure projects to boost regional interconnectivity and facilitate trade within the region.
The Northern Corridor projects will enable the countries involved to expand transport infrastructure and create opportunities at home.