Rwanda tipped on achieving sustainable economic growth

Rwanda should increase national savings, improve the human capital resources, as well as transform the agriculture sector to achieve its development goals and ensure sustainable growth, experts have said. Speaking during a policy dialogue on “requirements for sustainable growth” in Kigali, the experts also called for more support to the private sector to ensure Made-in-Rwanda initiative succeeds and help reduce on the import bill.
Dr Hermann Boemel, the GIZ programme manager, speaks at the policy dialogue on Tuesday. Rugwabiza (centre) and Prof Ndahirirwe listen to the presentation. (Lydia Atieno)
Dr Hermann Boemel, the GIZ programme manager, speaks at the policy dialogue on Tuesday. Rugwabiza (centre) and Prof Ndahirirwe listen to the presentation. (Lydia Atieno)

Rwanda should increase national savings, improve the human capital resources, as well as transform the agriculture sector to achieve its development goals and ensure sustainable growth, experts have said. Speaking during a policy dialogue on “requirements for sustainable growth” in Kigali, the experts also called for more support to the private sector to ensure Made-in-Rwanda initiative succeeds and help reduce on the import bill.

“It is also essential to ensure citizen participation and inclusiveness and enhance good governance and accountability,” they added during the dialogue was organised by Rwanda Economic Policy Research Network (EPRN) in collaboration with Ministry of Finance on Tuesday. It brought together researchers from academia and international organisations, economists, business leaders and general public.

Speaking at the event, Prof Kasai Ndahiriwe, the director of monetary policy and research at National Bank of Rwanda, said firms like cement maker, Cimerwa have played a big role in reducing imported building materials. This strengthens the call for increased support to industrial sector to improve the country’s balance of trade and reduce trade deficit.

Prof Ndahiriwe said Rwanda’s formal trade deficit eased by 22.6 per cent in the first nine months of 2017, to $1,007.0 million, from $1,302.10 million due to 47 per cent increase in formal exports and 5.4 per cent decline in formal imports. The decline in import bill resulted from the rise in domestic production of some items, such as cement.

“As a result, during the same period, formal imports coverage by exports improved to 38.6 per cent against 24.8 per cent recorded in the corresponding period of 2016,” he said.

He advised businesses to always develop good strategies, saying most of the enterprises that collapse or those that are barely making a profit are operated without plans.

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One of the participants raises a question during the meeting.

The expert added that skills development is central to ensuring sustainable growth as industries and other sectors are able to access skilled personnel locally, which saves the country’s foreign exchange.

Leonard Rugwabiza, the chief economist at Ministry of Finance, called for all stakeholders to continuously brainstorm and conduct research on ways that can propel the economy and improve household incomes of Rwandans. “We need to understand where the country has come from, where it is and plan its future growth,” he added.

“We need to learn from how other countries have been able to develop and achieve sustainable growth. However, the role of policy-makers, academics and researchers in the country’s economic future cannot be underestimated,” the official said during the dialogue.

Over last five years, Rwanda has registered impressive economic performance and future prospects remain strong. In 2016, the economy expanded by 5.9 per cent, higher than the global average growth rate of 3.6 per cent. It grew by 4 per cent in the second quarter of 2017 and is projected to expand by about 6 per cent this year.

Taxes weighing down business growth

Many of the participants, however, raised concern over the high taxes, saying they are a big barrier to business development and affect efforts geared at building a sustainable economy. They said that high taxes were one of the main reasons start-ups collapse within a short time.

Rugwabiza, however, said tax burden was being exaggerated, noting that tax rates in Rwanda are not high compared to other countries. He explained that the problem could be low productivity of many enterprises, adding that the tax burden drops with higher output levels. The official said Rwanda’s tax ratio to GDP is at 15.7 per cent.

The tax burden is not caused by low financial capacity of companies, but it’s because many business operators don’t have business plans or proper governance systems, which leads to financial leakages and failure to meet their tax obligations, according to Ndahiriwe.

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