Kigali records economic gains, despite constraints

Rwanda's economy grew 9.9 percent in 2002 but this result, achieved in a region in turmoil, belies the continued difficulties that restrain development, the UN Economic Commission For Africa (ECA) reported on Wednesday.

In its Economic Report on Africa for 2003, released in Addis Ababa, Ethiopia, the ECA said one factor that explained Rwanda's economic growth during the year under review was good weather that boosted agricultural output to 14.4 percent GDP growth. It was not a sustained rise in productivity. The normal picture is that agricultural productivity is sluggish, the ECA said, although the sector is the mainstay of the economy. One problem is that the sector remains a subsistence activity with "few links" to other parts of the economy.

But while the agriculture sector remained robust, the ECA said, the "GDP was supported by rapid expansion in construction, growing at 15 percent". It added that this was partly due to home building by returnees.

On the whole, it said, there had been little diversification of the economy and non-agricultural sectors remained limited, with growth in these sectors being of "minor significance".

In fact, manufacturing - which the ECA said remained "beset by technological and skills restraints" - grew just 5 percent, down from 7.2 percent the previous year.

Although services grew by 4.5 percent in 2002, the ECA said, this reflected a slow down in the sector since 1997, "partly because of the gradual phasing out of emergency relief".

The cost of demobilising troops returning from duty in the Democratic Republic of Congo raised Rwanda's fiscal deficit to 11 percent in 2002, rather than the 9.9 percent target. The deficit for 2003 is expected to remain around the same. The deficit level, the ECA said, was "a key issue" in recent talks with the International Monetary Fund for renewing the country's Poverty Reduction and Growth Facility.

With an area of 26,338 sq km and eight million people, Rwanda is one of the most densely populated countries in the region, a factor that affects the government's effort to reduce poverty. Rwanda's Poverty Reduction Strategy is set out under the government's Vision 2020, which aims to get the country to a middle-income status by then. Key elements of that plan are to implant good government; increase agricultural incomes and off-farm employment in the rural areas; develop the service and manufacturing sectors.

Others parts are to increase education and skills training; liberalise the economy and reduce the risks of doing business in the country; exploit the opportunities of regional integration; and reduce poverty by tackling the in equalities arising from gender and age.

"As Rwanda pushes forward with its Poverty Reduction Strategy, spending must be reoriented towards reconstruction and poverty alleviation," the ECA said.

It said these include the need to spend on infrastructure and rehabilitation of the farming system that collapsed during the period of conflict and after the 1994 genocide. Politically, the ECA added, the country needed to spend money on the genocide trials and on demobilisation and reintegration for former fighters, in its bid to reconcile the nation.

"These special circumstances come on top of the needs in health, education, and agricultural modernisation and the broader requirements of economic diversification, putting pressure on the fiscal deficit," the ECA said.

[Also see overview of ECA report]