Rwanda’s dedication to combating climate change, the vitality and resourcefulness of Rwandan youth who are champions of environmental preservation and climate action, and businesspeople who are leveraging their ideas to develop climate-friendly solutions for a greener tomorrow and positive economic change.
A landlocked country, Rwanda situated in the Great Rift Valley of Central Africa. The small African nation’s economic growth has been strong, and poverty has been eliminated by enhancing Foreign Direct Investment, FDI, in agriculture. Rwanda existing foreign investment is concentrated in commercial establishments, mining, tea, coffee, and tourism. Minimum wage and social security regulations are in force, and the four prewar independent trade unions are back in operation.
While the economic geography of Rwanda is characterised by relatively low levels of urbanisation (estimated at about 18.5% in 2016 – 2017 according to Integrated Household Living Conditions Survey (EICV) 5 data), a high urbanisation growth rate, high population density, and the urban dominance of Kigali City, the capital. Although the vast majority of the population already has access to mobile phones and out of roughly 13 million inhabitants, more than 4 million can now shop and pay their bills, taxes, and even police fines, using mobile applications. Simply go to the portal Irembo (the word means access in Kinyarwanda) to find most government services online says United Nations Educational, Scientific and Cultural Organization, UNESCO, a specialized agency of the United Nations (UN) aimed at promoting world peace and security through international cooperation in education, arts, sciences and culture.
Socio-economic recovery and sustainable development are key to the stabilisation strategy. While foreign-led investment projects are critical for sustainable development. According to the World Bank, Rwanda’s public-sector led development model has shown its limitations, with public debt increasing significantly in recent years. Rwanda’s heavy reliance on large public investments (at 13% of gross domestic product or GDP in 2019) has led to substantial fiscal deficits financed through external borrowing. Consequently, the debt-to-GDP ratio rose to 56.7% in 2019 (from 19.4% in 2010) and was estimated to have reached 71.3% of GDP in 2020, following an increase in borrowing needs due to the pandemic. External financing through grants, concessional and non-concessional borrowing, has played a key role in financing public investments. Going forward, the private sector looks set to play a bigger role in helping to ensure economic growth. Low domestic savings, a shortage of skills, and the high cost of energy are some of the major constraints to private investment. Stronger dynamism in the private sector will help to sustain high investment rates and accelerate growth. Promoting domestic savings is viewed as critical, along with inclusive growth. The momentum in poverty reduction has weakened in recent years, increasing the urgency to design a medium-term public investment strategy to achieve a more efficient allocation of resources geared toward projects critical for broad-based and inclusive economic recovery following the pandemic.
Rwanda has implemented a number of policies to transform its economic agenda. The government established and actively encouraged the Rwandan Development Board (RDB) to monitor the country’s business regulations, tourism, foreign trade, foreign and public investments, environmental conversations and broader economic development planning. The largest union, CESTRAR, was created as an organ of the government but became fully independent with the political reforms introduced by the 1991 constitution. As security in Rwanda improves, the country’s nascent tourism sector shows great potential to expand as a source of foreign exchange.
Since 2018 the government of Rwanda has decided to institute an integrated results and performance framework via the Economic Development & Poverty Reduction Strategy 2008-2012 (EDPRS). This complex of instruments, processes and institutional arrangements is used primarily, but not exclusively, by the government to monitor progress towards achieving objectives. These objectives are usually expressed as a set of targets that serve as values for particular indicators at specific dates. However, for the framework to be useful, its data and information streams and associated decision outcomes are integrated into the planning and budgeting process. In this way it can strengthen priority setting and realism in sector plans; domestic accountability; predictability of resource mobilization and allocations; efficiency in planning and budgeting where resources are constrained; clarity of cross-sector strategic outcomes; and identification mechanisms of future costed investment in core strategic areas. The framework also can serve as the basis for resource mobilization and predictability of donor support.
After over two decades on, Rwanda’s economy, left in tatters following the genocide, has come a long way. Rwandans are generally living healthier and wealthier lives. Rwanda embraced a new model of economic development. Its strategy: Build a global network of powerful friends to lure private investment — and market the brand of Rwanda. Also, Rwanda has implemented a successful doing business reform agenda in order to create a favourable and competitive business environment over the last ten years. As a result, Rwanda jumped over 100 places in the World Bank Doing Business Index, today ranking 38th globally and 2nd in Africa. The value of investments registered more than tripled from US$400 million in 2010 to US$2.006 billion in 2018. While in 2019, Rwanda registered investments worth US$ 2.46 billion, an increase of 22.6% from the previous year. Energy and manufacturing accounted for 75% of all investments registered (45% and 30% respectively). Other sectors that attracted significant investments were construction, agriculture, services including ICT as well as mining, according to official data.
Meanwhile, a report titled African Economic Outlook (AEO) 2022 indicates that Rwanda is vulnerable to climate change and is ranked 124 out of 182 countries on the 2020 Country Index of the Notre Dame Global Adaptation Initiative. Due to seasonal temperature shifts, the occurrence of extreme weather events has become more frequent, especially in high altitude areas of the North and Western provinces, and droughts in the low-lying Eastern province, causing serious damage to agriculture, infrastructure, health, and livelihoods. If left unaddressed, the total cost of climate change in Rwanda is estimated at an additional 1% of GDP a year by 2030, rising to 4% by 2050. Rwanda has submitted its updated NDC, which outlines the country’s commitment to developing a climate-resilient, low carbon economy, including a 38% reduction of GHG emissions relative to business as usual by 2030, equivalent to up to 4.6 MtCO2eq, estimated at $11 billion. To ensure that the country remains coordinated in financing these goals, the Rwanda Green Fund was created, and has since raised $217 million for green investments in RE, climate-smart agriculture, and sustainable urbanization. Rwanda is likely to meet SDG 13 by 2030.
However, as the first African country to access the financing facility to build resilience to the climate emergency, Rwanda’s economy will grow by 6.2% in 2023, and by 7.5% in 2024 says International Monetary Fund Managing Director Kristalina Georgeiva, in a visit to Rwanda held discussions with President Paul Kagame on the country’s economic outlook. In her speech she said,“I came away impressed by the dynamism and creativity of Rwandan youth advocating for climate action and environmental conservation, and entrepreneurs using their ingenuity to bring climate-friendly solutions for a greener tomorrow.” “I congratulated the authorities for being the first country in Africa to access the IMF Resilience and Sustainability Facility (RSF) for $319 million , together with a new Policy Coordination Instrument . This is a testament of Rwanda’s strong track record of policies and sustained implementation of reforms, including to address climate change,” Georgeiva added in her remarks.
The Fifth Integrated Household Living Conditions Survey (2016/2017) states that youth (aged 16-30) represent a huge sector of Rwandan society. About 29% of the total Rwandan population and about 78% of Rwandans are under 35 years of age. As such, their participation takes on even more importance. Connecting entrepreneurs on climate is about capitalizing on the innovative spirit by connecting people, ideas, opportunities, and action. While young Rwandans have become powerful proponents of the “win-win” philosophy of sustainable innovation. This young generation will not be bound by legacy infrastructure or, more importantly, legacy mindsets, which often hinder our ability to think outside the box. Rwanda recognizes these opportunities, as well as the opportunity offered by regulatory innovation to unlock the potential of this generation. The climate action plan, known officially as the Nationally Determined Contributions (NDCs), has been submitted to the United Nations Framework Convention on Climate Change and forms part of Rwanda’s obligations under the Paris Agreement. All countries are required to submit an updated plan every five years, each with a greater level of ambition. Rwanda is the first country in Africa to submit its updated NDC, and the ninth country globally.
With sound economic policies and the assistance of creative millennials, Rwanda’s plan for sustainability and resilience under President Kagame has demonstrated that a strong economy can be created from nothing.
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