Lagarde urges Rwanda to reduce aid dependency

29 Jan 15
Rwanda needs to reduce its dependency on international aid if it is to achieve its vision of achieving middle-income country status by 2020, the head of the International Monetary Fund has said.

By Judith Ugwumadu | 29 January 2015

Rwanda needs to reduce its dependency on international aid if it is to achieve its vision of achieving middle-income country status by 2020, the head of the International Monetary Fund has said.

In a public lecture at Rwanda’s Parliament, Christine Lagarde said it was critical for the east African nation to generate other forms of public revenue through tax increases if it wanted to strengthen its financial independence.

Lagarde pledged continued support to help the government achieve its ‘2020 Vision’, but said at 16% of gross domestic product, Rwanda’s tax-collection efforts fell below its peers in Africa.

The IMF will help Rwanda to broaden the tax base and strengthen tax administration so that Rwanda could bridge the gap, she said. It has already been heavily involved in providing technical assistance and capacity building in revenue administration and collection.

‘Rwanda has chosen to become a middle-income country [after overcoming extraordinary adversity], Lagarde said.

‘Rwanda must foster self-reliance. Mobilising domestic revenues will be critical in creating fiscal space as reliance on aid gradually recedes.’

She said the private sector also needed to be encourage to reduce its reliance on the public sector.

Infrastructure gaps were preventing the private sector from flourishing, particularly in transportation, water and energy.

Rwanda was also urged to harness the potential of regional integration to support export diversification and overcome geographic constraints.

Lagarde said: ‘The reforms I talked about are ambitious. Yet they are necessary to sustain Rwanda’s success into the future. And I am confident that policymakers will deliver. After all, they are bound by another homegrown initiative to improve governance and service delivery to the broader public.

‘But you should rest assured that your country is not travelling alone. The fund is proud to be Rwanda’s travel companion.’

 

 

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