Macroeconomic advice for poverty reduction

Project description

Title: Macroeconomic advice for poverty reduction in Rwanda
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Rwanda
Lead executive agency: Ministry of Economic Planning and Finance (MINECOFIN)
Overall term: 2010 to 2018

Rwanda. Broad-based growth, for the rural population as well. © GIZ

Context

Under its ‘Vision 2020’, Rwanda aspires to become a middle-income country by 2020. The proportion of the population counted as poor should be reduced to below 30 per cent. To accomplish this, Rwanda must sustain a high rate of economic growth over the coming years. The Economic Development and Poverty Reduction Strategy 2013–2018 has been introduced in order to achieve that.

In 2008, the government introduced a reform strategy for the management of public finances which includes macroeconomic elements. This has since been updated to provide the basis for the development strategy. However, the planning carried out by the economic experts is not yet sufficiently underpinned by macroeconomic analyses. If the country’s investment goals are to be achieved, it is essential that structures and processes are created for the use of new and innovative sources of financing (public-private partnerships, capital market instruments etc.).

Objective

Economic planning is increasingly based on well founded macroeconomic analysis. Processes exist for the use of new and innovative financing sources.

Approach

Besides establishing macroeconomic stability as a prerequisite for broad-based, dynamic growth, important instruments for the reduction of poverty include the pursuit of sustainable fiscal policies by the state, and the financing and management of public and private investments. The quality of macroeconomic analyses is important in this respect, as is their translation into policies by the Ministry for Finance and Economic Planning (MINECOFIN). Consequently, the programme is divided into two areas of action: macroeconomic management and investment planning and financing.

The programme is active countrywide. It supports government institutions with advice on policies, as well as technical, organisational and process advice. In response to a strong demand expressed by the partners themselves, much of this support consists of on-the-job training tailored to the tasks at hand. The main recipient of these services is MINECOFIN. Other partners are the National Bank of Rwanda and the National Institute of Statistics of Rwanda, as well as the National Investment Committee with its contributing sector ministries.

Through a number of measures, the programme is building up the analytical capacities of the Rwandan economic policy institutions and their employees. This is intended to raise the quality of reporting and macroeconomic planning. For instance, members of staff have received training in analysis and programming for the simulation model ‘Marumo’, introduced to Rwanda by the World Bank.

Rwanda. Change through sustainable investment – from an agricultural economy to a centre of international finance and services. © GIZ

An important partner is the Economic Policy Research Network (EPRN) whose members come from various different institutions in the country. With support of the programme, EPRN has organised the first academic conference on economic topics in Rwanda. This day-long event in December 2014 involved the country’s most important institutions. The governor of the Bank of Rwanda, who was patron of the conference, delivered the keynote speech. The papers presented and the subsequent discussions of the policy recommendations they contained were of a high standard. Selected articles will be published in 2015 in international professional journals.