A World Bank report, published last week, has commended Rwanda for its private sector-led growth strategy after it emerged the reason behind the country’s sustainable growth.
The report, “African Pulse: An Analysis of Issues Shaping Africa’s Economic Future,” sought to understand what contributes to sustained growth in a landlocked, resource-poor economy.
The report points to various approaches, including market diversification and structural reforms, such as business regulation, rule of law, protection of property rights and government effectiveness.
The report also found that in areas such as tourism and agriculture, the government had undertaken measures to foster the growth of the private sector to improve the sector’s role in the economy.
“Private sector development has played a catalytic role in Rwanda’s economic growth. The Government has undertaken measures to foster private sector participation in the country’s key industries, such as tourism,” the report reads in part.
“The government has launched measures to promote private sector investment in tourism, and formed a tourism group (through public-private dialogue) where the private sector is consulted on national policies and strategies.”
Other ways the role of the private sector was fostered was by enabling a business friendly environment by implementing market reforms such as investment codes, company laws, labour regulations and other laws to attract the sector’s participation.
“A one-stop window at border crossings was launched to ease customs procedures. After a myriad of government and private sector efforts, tourism currently accounts for 25 per cent of total exports, an increase from 13 per cent in 1997,” the report reads.
Private sector involvement efforts have also fared well in spurring performance of traditional exports such as coffee. Using coffee as an example, the report showed that by liberalising sectors and creating incentives, members of the private sector have increased their role in economic development.
“To strengthen the industry, the Government liberalised the coffee sector by lowering various trade barriers, creating new incentives to invest in coffee production, and fostering entrepreneurship within the industry,” the report says.
“The Government began opening the market for coffee exports to increase competition, and strengthening the value chain. The Government also initiated discussions about nurturing a high-quality coffee industry, which is less prone to price volatility.”
Prudent macroeconomic policies
The Bank report said Rwanda has been able to stay afloat during tough times by implementing prudent macroeconomic policies, which have seen inflation as well as international reserves maintained at average levels.
The report echoes comments by the Monetary Policy Committee (MPC) and the Financial Stability Committee (FPC) which last week cited that the monetary policy stance adopted by the government had ensured contribution of the private sector to economic growth.
Commenting on the performance of the prudent monetary policy stances, last week, central bank governor John Rwangombwa said they had served to contain both inflationary and exchange rate pressures while continuing to support the financing of the economy.
In the first eight months of the year, he said that the financial sector was serving to finance the private sector with new authorised loans increasing by 11.5 per cent to Rwf514.1 billion as a result of the policies.
The recent quarterly meetings by the Monetary Policy Committee and the Financial Stability Committee also established that assets which are the main indicators of the stability and soundness of the financial sector had continued to grow in the first half of the year.
“Credit to the private sector increased by 19.3 per cent and 28 per cent on annual basis in June 2016 for banks and microfinance institutions, respectively,” he said.
In recent months, several indexes and publications have cited that the sub-Saharan Africa region has experienced slow growth largely due to the turbulent global economic times.
Due to the ‘tough times,’ the average growth rate for sub-Saharan Africa region for 2016 has been projected at around 1.6.
Experts have associated the tough times to falling commodity prices and the recovering value of the American dollar against a number of African currencies.
However, Rwanda has maintained its projection for 2016 at 6 per cent, one of the highest in Africa. According to the National Institute of Statistics of Rwanda, in the first quarter of 2016, The country’s growth rate was at 7.3 per cent and 5.4 per cent for the second quarter.
Last week, Rwangombwa said that despite the seemingly tough times, he was still optimistic that the 6 per cent growth target for 2016 would be met.