By: Serge Mugabo, David Spielman, and Gracie Rosenbach
Rwanda is embarking on an ambitious transformation process to move itself from a low-income country to a middle-income country by 2035—and from a largely agrarian economy to a knowledge-based economy within that timeframe. But even with these ambitions, agriculture will have to play a central role in the transformation process because of its place in the country’s economy. The agriculture sector accounts for 65 percent of employment, 31 percent of household income, and 52 percent of export earnings (NISR 2019, 2021; Rwanda, Ministry of Agriculture and Animal Resources 2018).
A series of Strategic Plans for Agricultural Transformation (PSTA) that began in the early 2000s serve as the key vehicle driving agriculture’s contribution to the wider growth and development process. The current plan, PSTA 4, runs from 2018 to 2024, and is currently amid its midterm review.
That means that it is a good time to assess PSTA 4’s contribution to date—not only to economic growth, but also to employment creation, poverty reduction, and other economic improvements—and to think about how to improve returns during the second half of its implementation. Working in close collaboration with the Ministry of Agriculture and Animal Resources, IFPRI tackled these issues in a recent working paper using an economywide modeling framework adapted specifically to Rwanda. Key findings are summarized in two separate briefs (here and here).
Key findings indicate substantial gains resulting from the first half of the PSTA 4. Notably, model simulations suggest the following achievements between 2018 and 2021 (Figure 1).
- Each US dollar of agricultural spending corresponds to a US$2.05 gain in Rwanda’s GDP; the gains in 2018–2021 total an estimated $730 million
- About 116,000 new jobs were created from spending under PSTA 4, with most of these jobs being created outside of agriculture
- PSTA 4 spending helped to lift an estimated 1.1 million people out of poverty, with most of this poverty reduction occurring in rural areas
Figure 1. Annual growth rates in GDP, changes in the number of employed and poor persons, and change in diet quality index, as a result of agricultural expenditures
Source: Rwanda-RIAPA model
Regarding future investments, findings are best understood in terms of where additional gains might be realized by reallocating the current PSTA 4 expenditure and investment portfolio. If we assign equal importance to all four development outcomes of interest—GDP growth, job creation, poverty reduction, and diet quality—then expenditures associated with certain types of highly tradeable crops (vegetables; coffee and tea; and Irish potato), livestock, and R&D on both crops and livestock rank higher than other expenditure areas. Similarly, investments in small-scale irrigation ranks higher than other major investments such as hillside terracing and marshland development. And if the PSTA 4 portfolio was reallocated towards these higher-return expenditures and investments alongside a 5 percent increase in the budget, the gains to GDP would total an estimated $300 million in 2022–24.
Figure 2. Gains in GDP and employment in the total economy, in the food system, and in agriculture, as well as poverty reduction and diet quality improvement in national, urban, and rural households following 5 percent and 10 percent annual growth and new budget allocation in agricultural spending, 2022–2024
Source: Rwanda-RIAPA model.
Efforts to achieve these incremental gains will require several changes. First, there is a need to increase the effectiveness of certain PSTA 4 expenditures and investments to ensure higher returns to scarce public resources. Second, gains can be realized with a modest reallocation of these same resources with the PSTA 4 portfolio. Third, an increase in the level of resources allocated to PSTA 4—if accompanied by a modest reallocation towards higher-return expenditures and investments—can generate further gains. In short, there is scope for Rwanda’s agriculture sector and its food system to contribute even more to the national transformation process. Data-driven, evidence-based analysis such as this offer some clues on how to make this happen.
About the Authors:
Serge Mugabo is a Research Analyst in DSGD at IFPRI with the Rwanda SSP, based in Kigali
David J. Spielman is a Senior Research Fellow in DSGD at IFPRI and Head of the Rwanda Strategy Support Program (Rwanda SSP), based in Kigali.
Gracie Rosenbach is a Country Program Manager in DSGD at IFPRI with the Rwanda SSP, based in Kigali.
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