Investing in the future: Shaping inclusive economic policy

Project description

Title: Support for Macroeconomic and Investment Policies
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Rwanda
Lead executive agency: Ministry of Finance and Economic Planning
Overall term: 2018 to 2021

Context

Two out of five people in Rwanda live on less than 70 US cents per day, making poverty reduction a priority for the Government of Rwanda. In its VISION 2020 and the revised VISION 2050, the government sets out its long-term development objectives: Eliminating poverty and becoming an upper middle-income country by 2035 and a high-income country by 2050.

In order to achieve the long-term goals, the government is aiming for structural transformation to a knowledge-based economy. Sound economic and fiscal policies are essential for inclusive and equitable growth. At the same time, adequate public and public-private investments contribute to infrastructure development, which boosts productivity and facilitates structural changes in the economy.

Objective

Government and research institutions are in a better position to gear economic and investment policies toward inclusive growth.

Approach

The project operates in three closely linked fields of action.

1. Economic analysis: The project enables the responsible ministries to utilise macroeconomic projection tools, for analysing tax revenues and for policy impact assessments. At the same time, it supports empirical research on the basis of which the Ministry of Finance makes decisions. The project developed an integrated macroeconomic framework and corresponding database in the previous phase. These are now used by the staff of the Chief Economist Department (CED) and the National Bank of Rwanda (NBR).

2. Investment planning: The Ministry of Finance and line ministries are equipped with the means to plan and monitor investments. In order to appraise new investment proposals on the basis of the 2017 National Investment Policy, guidelines for feasibility studies were developed to simplify appraisals. New monitoring and evaluation procedures also allow for better monitoring of investment projects. Planning, execution and monitoring of investment budgets are integrated in the Ministry of Finance budget execution system. The project also supports training of staff at the National Development Planning and Research Department (NDPR) and in the line ministries in the areas of investment appraisal, financial analysis, as well as monitoring and evaluation.

3. Research and public dialogue: The project cooperates with the Rwandan Economic Policy Research Network (EPRN), which promotes dialogue between research institutions and individual researchers. It also supports the University of Rwanda (UR) in establishing a Master’s programme in Applied Quantitative Economics (AQE).To this end, a partnership agreement has been concluded with two German universities. The Rwandan Institute of Policy Analysis and Research (IPAR) is supported in establishing itself as a leading economic research provider in Rwanda.

Results

The project has developed macroeconomic models for the Ministry of Finance and the National Bank of Rwanda. These serve as the analytical foundation for policy decisions – for example with regard to the COVID-19 crisis, employment, long-term growth projections, population dynamics and gender aspects.

Through the Young Economist Programme, the Ministry of Finance provides courses in economics and on-the-job training to about 15 graduates each year. This prepares them for work in the Ministry of Finance or other government institutions.

The newly developed project database in the Ministry of Finance captures all ongoing, approved and newly proposed projects which are entered in the investment or development budgets. In total, the projects account for about ten per cent of Rwanda’s gross domestic product.

The national guidelines for monitoring and evaluation of government projects and programmes form the basis for two evaluations. These provide information on the effectiveness of selected investments for future planning purposes.

The University of Rwanda has revised the Master's programme for economics with a focus AQE. The process was supported by experts from Kiel University and the Kiel Institute for the World Economy.

The IPAR research institute received support from an integrated expert in expanding research competencies and through contract research. It is now in a better position to deliver scientifically sound studies on economics topics.

The research network EPRN is now able to cover 40 per cent of its operating costs with its own funds. To date, EPRN has organised six research conferences with an average of 200 participants and held about 12 events and trainings with around 25 participants each year.  

Last update: March 2021

Download