Friday, 29 February 2008

Rwanda's EDPRS

I came across Rwanda's Economic Development and Poverty Reduction Strategy this week, on the finance ministry's website at The plan and the procedure for reaching it are mainstream best practice: education, health, and governance reforms, government support for private sector development, and consultation in preparation.

One thing surprised me; the sky-high inequality, almost as great as Brazil or South Africa. I had always thought of Rwanda, for all its social tensions, as quite equal in distribution of income. The report has a good breakdown of how the distribution has occurred, and where.

One thing did not surprise me; national savings are low, while national investment is high. It is a problem elsewhere in Africa. Frequently growth is quite strong, helped by solid investment rates. However, foreign donations and cheap loans are responsible for holding up the investment, rather than domestic savings. It makes the growth seem artificial in some ways, because donors can decide on any growth rate they like and achieve it by large enough transfers. A major challenge, recognised by Rwanda, is getting savings rates high enough to support growth rather than relying on foreign largesse.

It is common wisdom that strong financial infrastructure is important for mobilising savings, which is one of the reasons that microfinance has achieved such attention in recent years. I'd like to know how East Asian financial mobilisation occurred, and whether the high savings rates were only possible because of microfinance. I've never heard of the Chinese communist party running microfinance.

This evidence would be valuable. It's on my list of things to look up.

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