IMF offers development tips to Civil Society

Coming from the background of cultural studies, I received the invitation to the IMF seminar on “macroeconomic stability in Rwanda”, with trepidation for my knowledge of Economics which is rather elementary.

Coming from the background of cultural studies, I received the invitation to the IMF seminar on “macroeconomic stability in Rwanda”, with trepidation for my knowledge of Economics which is rather elementary.

However, my fears of econometrics and such stuff were allayed by the keynote speaker Mr. Reid Whitlock, Rector of School of Finance and Banking, Kigali.

The key note speech underscored the primacy of the concept of ‘linkages’ in national, regional and international development. Distinguishing linkages from networking, he advised academic disciplines, government departments, private sector and civil society to connect with one another and to avoid thinking in a box.

To businesses, he said, “go beyond your core businesses and establish links with what is going on around you” so that as you get informed by experiences of others, your own expertise benefits others.

With linkages, skills, experience specialized knowledge available in academic institutions, specialized agencies like IMF circulate to all sectors.

The advice could not be more timely than now when the government has expressed determination to transform Rwanda into a middle income economy.  According to Whitlock, the rural sector needs knowledge about production, processing and marketing of their produce, hence, the need for linkages with urban based experts.

The seminar which brought the Academia, Civil Society and Press together was, indeed, an occasion for linkages with the International Monetary Fund. Personally I obtained significant insights into the operation of IMF, for contrary to earlier perceptions, the organization plays a key role in the global financial stability. In the case of Rwanda, IMF technical assistance to Rwanda, which is essentially surveillance and policy advice, focuses on Revenue and Administration Policy, Public Finance Management, Monetary and Exchange Rate Policies, Banking and Finance Sector, Legislative Framework, Statistics and Macro-Fiscal Training.

So what lessons for Rwanda’s private sector and civil society?  Many hard facts were revealed which could serve as a basis for good practice. Foremost is the need to increase domestic revenue and to reduce trade imbalance.

Mr. Dimtry Gershenson, IMF representative to Rwanda paper presented to the seminar showed the structure of the economy, thus; 1. Rwanda is a small landlocked economy dependent on subsistence agriculture; exports of minerals, coffee and tea; and aid.2. GDP of $ 5 billion ( $ 5000 per capita or $ 1,000 in PPP terms). 3. Since 1994, real per ca pita income increased by 2/3 or  3 % a year.

Gershoson said from 1999 to 2009 that Rwanda’s expenditure continues to outstrip revenue, depicting heavy dependency on grants. To address this issue, we need to increase domestic revenue and to reduce trade imbalance.

It was the contention of seminar participants that, whereas the government has to provide appropriate policies and environment for development, the private sector and civil society play a vital role in national development.

In the area of improving competitiveness and export development Mr. Richard Newfarmer of the International Growth Center, stressed that Rwanda could use trade to grow by learning lessons from international experience. Improving infrastructure, access to larger fast growing markets, economies of scale and economies of specialization, reducing costs of trade and ability of skilled labour are some of the key trade drivers.

It was observed that Rwanda could lower logistic costs in terms of increasing storage capacity, among others. It was observed that at one point transporters had to stay for days before unloading fuel due to lack of storage facilities. Other factors are boarder efficiency (which is being addressed) and transport costs which account for 40% of the cost of imported goods.

The solution to transport cots could be a railway link with the cost. Rwanda should seriously invest in import substitution. There are a number of goods on the market which could be substituted with locally made ones from foodstuff, cooking oil, lotions, soap, drinks, milk product, etc. Some of them could be processed in cottage industries, like they do in India.

While the Civil Society initiates dialogue among various stakeholders aimed at adoption of enabling policies, the private sector in Rwanda and government departments should aggressively look for ways of being competitive at the local level as well as regional levels. Let’s look for areas where we have economies of scale and economies of specialization to our advantage and exploit them to the full.

I was impressed to learn that the service industry in Rwanda grew by 25% between 1997 and 2007; this is just one example where we could increase our efforts.

Export product ‘deaths’ reported in Rwanda could be a thing of the past if addressed through trade/ export policies related to tariff impediments, production costs of electricity etc, and of course mobilization of other resources, like skilled labour and considerate bank loan rates.


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