Rwanda harnesses technology to drive recovery: IMF
In a conversation with IMF Country Focus, Rwanda's Minister of State in Charge of National Treasury Richard Tusabe explains how his government is leveraging technology and grass-roots networks to fight the spread of COVID-19 and ensure financial support for households and businesses.
Most of the impact has been on Rwanda's services sector, which has been adversely affected by limitations on international travel and social distancing measures. The services sector is projected to grow by only 1 percent in 2020 due to lower trade (imports are expected to fall by 7 percent) and travel. Travel to Rwanda has fallen by 70 percent, which has caused a major impact on the tourism industry.
The agricultural sector, which is a major economic driver, was also impacted, further to the already expected decline because of adverse weather. A reduction in demand due to COVID19 as well as a drop in international prices of export crops has made the situation worse. The industrial sector will also slow because of a drop in demand and delays in foreign direct investment in the construction sector.
Economic growth is projected to slow down to 2 percent in 2020 from 9.4 percent in 2019. In the medium term, the economy is expected to recover with growth reaching 6.3 percent in 2021, and back to its average growth of 8 percent in 2022.
Rwanda's use of grassroots networks and local governments has been cited as an innovative way to assist households. How does this program work?
In the year 2000, Rwanda adopted the National Decentralization Policy-a "people centered" policy that uses grassroots networks and local governments to help lessen shocks on households and alleviate poverty. Household assistance is based on Ubudehe categorization, a long-standing cultural value of mutual assistance that was also adopted by the government as a poverty reduction strategy.
Ubudehe is a socio-economic stratification system that provides support for Rwandans in lower categories with social protection schemes such as cash transfer, public works, access to agricultural inputs, shelter, health, and education with the aim to graduate to higher categories. The process has been useful in identifying vulnerable householdsthrough community-based identification, the Ubudehe database, and other meansthat need assistance as a result of the crisis. In 2018, core social protection programs covered 6.5 percent of the population. These are being scaled up to cover more people in this period of pandemic.
In April 2020, the government established an Economic Recovery Fund that will be bolstered through emergency assistance from the IMF's Rapid Credit Facility.