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December 8, 2022
Agribusiness Featured

Rwanda: World Bank to Inject $300m in Agriculture Sector

The Rwandan economy is projected to grow by 5.1 per cent in 2021 after its first recession since 1994. However, experts say that the path to growth and recovery is not an easy one especially taking into account challenges in access to vaccines, measures to curb the pandemic as well as purchasing power of the public among others.

The New Times’ Collins Mwai spoke to Rolande Pryce, the World Bank Group Country Manager for Rwanda on preconditions for recovery, challenges being experienced and their investments to drive recovery.

Excerpts below:

As the World Bank, what do you think of Rwanda’s pursuit towards economic recovery following the recession?

While we do have a projection of growth of 5.1 per cent, it is dependent on a number of things. I believe the government would want to see mass vaccination as it sort of provides a degree of defense for the population.

The fact of the matter is that vaccines have been slow in coming not due to the government’s fault but largely due to challenges in accessing vaccines in developing countries. That is something that the bank cares about and continues to push for.

Beyond vaccine access, what are the key stress points that you have identified in the Rwandan ecosystem that have an effect of recovery?

We think that the path to recovery is quite daunting for Rwanda like many countries. Apart from vaccines, you need to reactivate demand and supply and people need to have jobs among other things.

But where do we find ourselves, in businesses the clients have reduced purchasing power, social distancing is still present which has also seen people spend what is essential.

There are also still challenges in terms of supply chains, shipment, and number of containers among others. There are some constraints on export where some traditional clients in the international market are not demanding as much.

On the supply side, there are challenges in supply systems as a result of the pandemic. There has also been a challenge in getting credit as banks are more reluctant when lending. Some of the goods that some firms use as inputs, might also have been disrupted in the supply chain, some more expensive or not readily available.

On the upside, even with the lockdown that we experienced early this year, there was a 3.5 per cent increase in the first quarter, which is very positive.

On the challenge part, we feel that we are not facing a challenge because of the number of delta cases that we are seeing. I think the government is managing it well. It however leaves a bit of uncertainty especially in that the vaccination is not as significant.

What are your plans for investment to support the recovery?

We know that the way out of this is growth, stimulating the economy, getting people to have jobs, getting people back to economic activity.

One of the interventions has been access to finance for recovery and resilience projects, a loan of about $150M which was supported by a loan from the Asian Infrastructure Investment bank with about $100M. The $250M is going towards capitalizing the Economic Recovery Fund. This economic recovery fund is the place where I believe the government is trying to address a number of issues.

Access to finance or money for investment is usually very expensive, the interest rate is often quite high. Getting funds through the economic recovery funds means that it is less expensive and the term of the financing is also more ideal. That is one of the key contributions to stimulate economic activity.

The government has been outstanding in increasing social protection coverage and benefit, this has helped to reduce poverty.

The World Bank is also going to support a new agriculture operation before the end of the year in the amount of almost $300M in the agriculture sector which will be critical in the recovery process and a majority of people in the country depend on agriculture for their livelihood. We have to make sure that agriculture works for people.

You have mentioned vaccines as a key factor in economic recovery, in your partnership with the government, what have you seen with regard to vaccine acquisition processes which Rwanda and other African countries have cited as a challenge?

The longer it takes to get the vaccines, the longer it sort of takes to start resuming economic reopening. When the vaccination agenda started out, we felt that money was going to be the issue which is not what turned out to be.

The bank in April 2020 made money available for Covid-19 testing, Personal Protective Equipment and setting protocols among others. At the time, the government took a loan-grant split of about $14.5M and an additional $1M through another widow to support the process. It was one of the first set of resources that the government secured to respond to the pandemic.

Around November last year when the vaccine agenda became live, the government started to make preparations. Rwanda was among the first countries to get its documentation to COVAX in order to get the initial 20 per cent. We worked together providing technical assistance to develop a vaccination plan, deployment of vaccines, and acquisition of vaccines among other aspects.

In April this year, we were able to approve an additional $30M loan and grant mix, which would focus on vaccine acquisition and deployment and health systems strengthening.

It later emerged that money was not the issue, the government has paid for vaccines from a number of sources but has not been able to access the vaccines largely because the manufacturers have not been able to deliver on their contracts.

You will recall that for vaccines manufactured in India, India had asked for a moratorium on exports because they were having a surge in cases. Pfizer has had a great demand and they are not producing enough to manage the demand.

The real issue is that manufacturing companies are not able to respond to the demand. Through COVAX there has also not been supply as was expected. Rwanda has had other aspects under control and has been awaiting accessing the vaccines. We are also supporting through advocacy at the highest levels.

So safe to say that we are now riding on hope?

I think the approach is to be prepared and the Rwandan government has been prepared on multiple aspects including deployment plans, being part of mechanisms such as COVAX. The government also went ahead and negotiated contracts to secure more doses.

Rwanda has kept itself open to legitimate arrangements that can help in acquisition of vaccines to protect the population.

The Covid-19 pandemic and measures to curb it have seen reduced domestic taxes collection as economic activity is affected with uncertainty on how long the turbulence will last. What are your thoughts on revenue collection going forward?

Rwanda is among the countries on the continent that has good trends in domestic revenue mobilization, around 16 per cent.

But the fact is that economic activity has decreased and will impact the amount of revenue that the government is able to collect. Additionally, some of the measures that have been set up to encourage business, have been tax measures which further means less collections.

There is no magic here to be frank, at some point, we hope that covid-19 will lift somewhat and at some point, the measures of foregoing tax revenue are going to be removed. One of the other things will be the adoption of measures of spending control. There are some things that the government has to spend on, those things will continue. There might be other things that expenditure could be trimmed.

Another thing is efficient use of available resources for instance ensuring that there are no delays in projects. Every delay means more cost.

We also need to tap into the private sector more to finance some infrastructure projects that were previously solely financed by the government. We need to find ways we can bring in the private sector.

It has also emerged that small scale enterprises’ survival chances have been somewhat limited as most of the interventions were targeted at established companies and businesses. As a stakeholder in economic recovery, any way interventions are being tailored to be more relevant to SMEs?

One of our big interventions was the initiative of Access to Finance and Recovery where there is a set of resources that will be going to BDF that look at risk sharing and financing for companies when they are vulnerable and providing bridge financing. This is targeted at SMEs which were not able to take advantage of other financing opportunities. We are ensuring that there is money for the institutions and that there is technical expertise for the institutions.

In the first round of the economic recovery fund, it was essentially subsidies to companies that were able to prove that they were affected by the pandemic. One of the findings later was that some companies were not able to show the impact. Some did not have robust book keeping or projections. We recognize that it is essential to help the SMEs build their capacities for better planning, records, response among others. So that whenever there are challenges, they can understand and show the trend of impact.

We also noticed that where companies did well during the pandemic, these were companies that were able to go digital to be able to reach their customers through a digital platform. Here I see opportunities for businesses to think about how one can facilitate how to get products out internationally or regionally.

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