Africa-Press – Rwanda. Prime Minister Edouard Ngirente has tipped African countries on the importance of forging partnerships as they make efforts to recover from the effects of the Covid-19 pandemic.
He was speaking at the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) Combined Forum in Kigali on Monday, October 11.
MEFMI is a regionally owned institute currently with 14 member countries: Angola, Botswana, Burundi, Kenya, Lesotho, Malawi, Mozambique, Namibia, Rwanda, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
It was established by senior economic officials and financial managers in the region to respond to the entrenched problems that African countries faced in regard to capacity for debt and reserves management as well as macroeconomic management. This year’s edition of the forum took place virtually.
Addressing the participants, Ngirente spoke about the difficulty that has been created by the pandemic, saying the economies in the region and the world are facing long-standing challenges caused by the Covid-19 pandemic, among which, the growth path for most economies turned negative in 2020, accompanied by extensive loss of jobs and income losses.
“These losses cut across all countries, and have had the biggest negative economic impact on many economies in Africa, leaving us with limited fiscal space to respond to the Covid-19 crisis as well as provide required public services,” he said, adding that debt levels on the continent have increased with debt-to-GDP rising from 60 per cent prior to the pandemic to 70-75 per cent in 2020.
“In sub-Saharan Africa, public debt increased by more than 6 percentage points in 2020. The interest payments reached about 20 per cent of tax revenues and in some countries exceeded one-third of their revenues,” he said.
“Some projections show that the financing needs for Sub-Saharan African countries could be around $425 billion for 2021-2025. This makes it even more difficult and expensive for countries to create fiscal space necessary to deal with responses to Covid-19.”
Ngirente emphasized that to “achieve full and inclusive Recovery,” there is need to forge strong and sustainable partnerships, as he called upon his audience to apply the lessons learned from Covd-19 to move faster on key reforms and investments that will revive economies.
He took the participants through Rwanda’s economic performance, noting that the country recorded a sustained average growth of 8 per cent over the last two decades and 9.5 per cent in 2019, but like other countries, its economy contracted in2020 due to the effects of the Covid-19 pandemic.
“We registered a negative growth in 2020 mainly due to restrictions implemented since early 2020 to fight against Covid-19. The total public debt has increased due to an increase in health-related spending and a decline in tax revenues,” he said.
He also spoke about the policy initiatives that the country has taken in its quest to ensure a quick recovery, for example, the Economic Recovery Fund (ERF) and the Manufacturing and Build to Recover Program (MBRP).
The Economic Recovery Fund (ERF) put in place to support various businesses most hit by the pandemic so that they can survive, resume production and safeguard employment, while the Manufacture and Build to Recover Program (MBRP) targets to increase investments through provision of attractive incentives to investors, to boost domestic production as well as to create new jobs for our population.
“Fiscal instruments were also used to enable government provide assistance to affected production sectors and firms. This was done through temporary tax cuts, moratoriums on debt repayments, and temporary credit lines,” he noted.
“We also raised funds to cater for health-related spending and social protection support to the vulnerable populations especially during lockdowns,” he added.
According to economic projections, Rwanda’s economy will recover by 5.1 per cent this year and is expected to return to pre-pandemic average growth trajectory of 8 per cent by 2023.
The fiscal deficit is also projected to narrow to 7.8 per cent of GDP in 2021 and to 7.2 per cent in 2022 due to a planned fiscal consolidation strategy put in place in the fiscal year 2021/22.
“Our current economic projections rely on the planned rollout of Covid–19 vaccines, which will trigger full opening of our economy and a rebound in tourism and foreign direct investments,” he said.