The last World Bank poverty assessment for Rwanda was based on research completed in 1993 and painted a picture of declining incomes and contracting economic opportunities for the poor. In April - June 1994, up to one million people were killed from a total population of 7.6 million in a series of genocidal massacres. In the aftermath of the genocide, two million people fled to neighboring countries and up to one million people who had been pushed into exile by previous purges returned to their country. In economic terms, Rwanda saw GDP fall by 50 percent in 1994, and output has still not regained pre-war levels. Rwanda remains one of the poorest countries in the world, with per capita GDP under US$220 in 1997.
The effects of this degree of social and economic turmoil on the poor are likely to have been substantial. Although numerous studies have been conducted on reconstruction needs, very little information is available on the situation of poorer households since the genocide. The impact of the events on the poor is important not only because social protection has been, and continues to be, a goal of reconstruction efforts since the war, but also because poverty levels are linked to political stability. Rising poverty undoubtedly played some role in exacerbating social tensions leading up to the genocide, and reducing poverty is critical in its aftermath not only as a goal in itself but also as a means to improve the prospects for social and political stability. Having shown great commitment to reconstruction since the war, the government is now in the process of launching an ambitious growth strategy. It is important that this strategy benefit all sections of society, including the poorest.
The study aims to provide an update on the situation of poorer households three years after the genocide, and to place on the table for debate a series of strategies for poverty reduction. After describing the principal changes in the poverty profile, the report is divided into a section that addresses the immediate constraints to recovering incomes and meeting basic social needs, followed by a section on the medium-term prospects for poverty reduction.
Although household budget survey data are not available it is possible to estimate the changes in income poverty levels since 1994 through information on changes in the population, GDP, and targeted interventions such as food aid. It is clear that the events of 1994 caused a catastrophic rise in poverty in Rwanda, with approximately 70 percent of all households falling under the poverty line in 1997 compared to 53 percent in 1993. The depth of poverty has also increased, meaning that not only have poor households increased in number, they have also got poorer. Furthermore, there has not been a steady recovery in the poverty situation since 1994: after a small improvement in 1995-96, poverty levels rose again in 1997 following the influx of population from the Democratic Republic of Congo (DRC) in late 1996. The geographical profile of poverty has also changed, with the poorest prefectures before the war remaining poor in income terms but possessing better access to social services than other areas of the country. The characteristics of poor households have also changed dramatically: poor households are now more likely to be female headed or to lack able-bodied labor. This labor constraint poses a formidable challenge to improving economic opportunities for these households.
In the social sectors, there has been a severe deterioration in health indicators, with infant mortality rising from 8.7 to 13.1 percent and maternal mortality almost quadrupling since 1990. Other social indicators-primary education, access to water and sanitation-have not declined as quickly as income poverty has increased, primarily due to strong government and donor support for the social sectors. However, while enrolment rates have not greatly decreased, there is a serious problem in the quality of basic education. Only 32 percent of primary school teachers possess appropriate qualifications to teach. A limited survey of schools undertaken for this study showed that less than 30 percent of basic teaching materials are available to teachers, and children possess less than 25 percent of the minimum package of school materials. This indicates that many children attend school without a teacher who is equipped to teach, or the basic materials to follow classes or record their new knowledge.
What are the implications of this changed poverty profile for poverty reduction strategies? First, the sharp increase in income poverty relative to social indicators, combined with the dependence of the majority of the poor on agriculture, indicates that the key to short-term poverty reduction is a rise in agricultural incomes. This should in itself help reverse the decline in social indicators, as nutrition improves and households generate more savings for education, but this is likely to be more effective if combined with actions to improve the quality and accessibility of social services. Second, a medium-term perspective on poverty reduction must be growth-oriented, but will need to ensure that the sources of growth are in sectors where the poor can benefit, and that the poor are equipped to access new economic opportunities. Both the short- and medium-term strategies must take into account the changes in the characteristics of poor households following the genocide, in particular gender divisions and lack of able-bodied labor.
Actions to Reduce Poverty in the Short Term
Based on the poverty profile, it is recommended that short-term poverty reduction initiatives focus on the following objectives:
- Enabling poorer households to increase their agricultural output and market their produce at fair prices;
- Improving the quality of primary education and lowering the costs for the poor, and;
- Improving access of poor households to basic medical care.
Addressing immediate constraints in agriculture.
Agricultural productivity was already in decline before the war, and now suffers from both structural problems and conjectural constraints stemming from the genocide and population movements. Output has recovered to only 78 percent of pre-war levels (with a higher population) and, amongst poorer households, agricultural incomes are frequently insufficient to cover consumption needs and generate seasonal savings.
The immediate constraints to raising agricultural incomes include: (i) the destruction of rural capital, in particular livestock, which both reduces yields and makes households more vulnerable to seasonal insecurity and sudden income shocks; (ii) labor constraints, due to the loss of family labor through death or imprisonment and restrictions on mobility; (iii) lack of access to inputs; (iv) increased insecurity of land access, and; (v) weak transport and market links.
Recommendations to address these constraints include: (i) an increase in public investment in agriculture, oriented towards quick impact projects to rebuild rural capital. These may include direct transfers, agricultural credit, and rural public works. However, labor intensive public works should be avoided in regions that suffer from strong labor constraints, and may not be able to address the poorest labor deficit households, who will need a more flexible type of income support; (ii) rationalizing restrictions on mobility, reducing the cost of documentation and increasing the speed of processing to enable people to move between communes for work and trade; (iii) accelerating the allocation of land that is unoccupied (marshland) or under temporary occupation by returning exiles.
Rwanda has also become highly dependent on food aid since 1994. This risks distorting the market, in particular due to weak seasonal management of distribution. The food aid program also suffers from targeting leakage, since food for work programs are often inaccessible to the poorest households due to their lack of able-bodied labor and need for immediate payment. It is recommended that a substantial proportion of food aid be monetized as per current government proposals—with counterpart funds used for agricultural investment. Food security will also be improved by the establishment of public information services to disseminate information on crop price movements, to improve the negotiating power of small producers, provide early warning of food deficits and manage the importation of food aid.
Improving access to basic education
The principal constraints in primary education occur in two areas. On the demand side, low real income levels and labor constraints in poor families have increased both the direct and opportunity costs of schooling. On the supply side, as discussed above, the quality of education-teacher training, availability of materials-is a more binding constraint than the physical availability of infrastructure. Recommendations to improve educational opportunities for poor children in the short term should therefore focus on improving quality rather than targeting immediate increases in enrolment, and include: (i) expanded teacher training programs; (ii) investment in teacher materials; (iii) measures to subsidize the cost of school books, and targeted subsidies for the poorest households.
Improving access to health care
In health as in education, the major constraint is the cost of healthcare in relation to the appallingly low levels of monetary income available to poor households. The cost of care is likely to rise in the near future, as the Ministry of Health has recently introduced a policy of 110 percent cost recovery on medicines. Evaluation of the impact of this policy on poorer households is a top priority, and transitional measures to extend subsidization, possibly targeted to the poorest households, should be considered if utilization rates fall. Other quick impact interventions in health efforts to increase the availability of skilled personnel and the reorganization of pharmaceutical distribution channels to avoid ruptures in the supply of basic medicines.
Medium-Term Framework for Poverty Reduction
Rwanda will reach the limits of recovery-based growth fairly quickly, as the remaining factors of production that have been idled since the war are brought back into activity. Growth is expected to return to its long-term trend between 2001 and 2003. At this point, poverty reduction will rest less on ensuring that the poor are able to recover their economic activities and incomes, and more on the prospects for rapid and sustainable growth. To assist in meeting the overall goal of medium-term equitable growth, poverty reduction objectives should:
Promote growth in sectors that will directly benefit the poorest;
Ensure that legal and institutional frameworks for economic activities favor access by poorer households;
Equip poor households with the skills and knowledge necessary to access new economic opportunities, and;
Provide the social and economic infrastructure necessary to support the movement of poorer households into non-agricultural employment, in particular through improvements in urban infrastructure and services.
The government has achieved strong progress in macroeconomic stabilization since 1994, and has implemented a number of structural reforms. Prioritizing those structural reforms that will improve economic opportunities and incomes for the poor remains vital. But the principal macroeconomic constraint for poverty reduction in the medium term is the lack of public resources available for investment in human capital.
Government revenues have declined dramatically since the war. Of this reduced pie, the share of the social sectors in current expenditure has decreased from 35 percent in the mid-eighties to around 22 percent in 1996-7. This is particularly destructive as needs have increased-due to reduced income levels households are unable to spend the same on health and education as was spent before the war-so higher allocations are necessary to overcome this poverty effect. Current expenditures on health in 1997 were only US$0.6 per capita, and on education only US$5.62.
Both military expenditures and the debt burden constrain allocations to the education and health sectors. The former should be addressed by government in keeping to demobilization targets as far as possible given the security situation, and the latter through rapid negotiations to treat Rwanda as a special case for accelerated debt reduction under the HIPC framework, together with external assistance for debt service in the transitional period. The government has already raised allocations on the social sectors by 30 percent between 1997 and 1998, and assistance in relieving the debt burden should enable further rapid progress. In order to achieve pre-war current expenditure targets of US$11.00 per capita on education and US$4.50 per capita on health by 2003, the total share of health and education in the current budget would need to rise to 40 percent. Increased investment spending on the social sectors will also be necessary in the medium term to finance an expanded infrastructure program, in particular for secondary and technical education.
Medium-term growth in agriculture is constrained by low productivity, lack of viable investment opportunities, lack of tradable land rights and adverse incentives for cash crop production. Addressing these constraints will require: (i) investment in fertilizer promotion and the cultivation of higher-value-added crops; (ii) careful consultative design of a land reform program to transfer tradable rights while protecting access of women and the poor; (iii) liberalization of the tea sector, with short-term action prior to liberalization to raise producer prices, and; (iv) suppression of the variable tax on coffee.
Private sector development and employment creation
Rwanda has strong export potential for selected commodities-both traditional exports such as tea, coffee and hides and skins, and non-traditional such as fruit and vegetables, cut flowers, pyrethrum and textiles. However, many of these, while carrying high potential producer shares, have low employment potential. Thus growth in these export sectors will assist rural poverty reduction but is unlikely to help the landless poor. Semi-processing of local and regional materials provides better potential for non-agricultural employment creation, as does the promotion of small and medium enterprises for manufacturing and services.
Constraints to private sector development and job creation include: (i) weak domestic production logistics; (ii) barriers to international trade, including the level of trade taxes and fees, lengthy freight immobilization and heavy documentation procedures; (iii) strict registration requirements for informal sector businesses; (iv) lack of access to medium-term investment credit, in particular for small, medium and micro-enterprises; (v) regulatory barriers for women entrepreneurs.
Education and health
Lack of a literate and skilled workforce will both constrain investment and exacerbate inequality, by producing high wage differentials between skilled and unskilled workers. Expansion of primary school enrolment is therefore vital in the medium term and will require higher investment in infrastructure to maintain the quality of learning. But the key medium-term constraint in education is in the secondary school system, which, with gross enrolment at only 4.6 percent, provides a bottleneck preventing the majority of the poor from increasing their skills beyond the most minimal level. Reforming the boarding school system to lower costs to parents, expanding secondary and technical school infrastructure, and improving the curriculum are priorities for medium-term poverty reduction.
The principal challenges for the health system in the medium term are; (i) containment of population growth, which at 2.9 percent annually constricts the potential for per capita income growth and means that many poor women are trapped in too onerous a cycle of child-bearing and child-care; (ii) preventing further increases in HIV incidence, which is estimated to have risen sharply over the last 10 years to around 11 percent of the population. This is still below the rates in neighboring countries, but is rising fast; (iii) decreasing external dependence in the finding of the health system. It is recommended that more vigorous efforts be made to publicize contraceptive methods and the benefits of spacing children, and that funds for AIDS prevention and assistance to victims and carers be increased.
Urban infrastructure in Rwanda is entirely inadequate to meet even the needs of the existing population, and cannot absorb rapid urban population growth. The principal constraint is sanitation: the Prefecture of Kigali estimate that they currently have capacity to treat only 3 percent of the liquid waste produced in the city. Land property rights and registration procedures also discourage investment in housing. Commercial infrastructure-roads and markets-is limited in coverage and badly degraded.
In effect, in the past Rwanda has survived an almost total lack of urban planning due to the small size of its urban population. But the country is now at a crossroads: if urban development is to be supported as part of the growth and poverty reduction strategy, this must go hand-in-hand with adequate planning and management of urban infrastructure. It is, therefore, an urgent priority to develop and implement an effective urban planning framework; to expand investment in sanitation infrastructure in Kigali, with the aim of extending sanitation services to all areas of the city, including the poor peripheral areas; and to improve and expand market infrastructure in both Kigali and secondary centers.
The political context for poverty reduction strategies
The Government of National Unity established in July 1994 has faced a formidable series of challenges. These include continued security threats from former soldiers and militia housed in camps along the border with Zaire during 1995 and 1996, the need to ensure adequate legal process against the 130,000 prisoners suspected of genocide crimes currently contained in Rwandese jails, the need to accommodate over 800,000 returning Rwandan citizens who had left the country between 1959 and 1994, and the final return and reintegration of 1.3 million people to Rwanda from Tanzania and the Democratic Republic of Congo in December 1996. In addition, the new government was faced with an economy in shambles, a civil service that had lost three quarters of its qualified staff, and widespread destruction of social and economic infrastructure. Under these difficult circumstances, the government has shown great commitment to reconstruction and has succeeded in stabilizing the economy and reconstituting basic services.
However, the climate remains very fragile: the increased insurgency following the influx of returnees to the north-west of the country continues to pose serious security problems; processing the cases of genocide suspects is proceeding slowly; and a high level of mistrust remains between different sections of society. Sustainable poverty reduction will rely not only on the developmental interventions outlined in this report, but on a successful transition to political and military stability and the development of a more representative and accountable model of governance.
Institutional framework to implement the poverty reduction strategy
Poverty reduction is a multisectoral issue, and requires strong coordination to avoid duplication of efforts or contradictory policies. It is also important that the government has the capacity to monitor monetary and social indicators of poverty on an ongoing basis, in order to be able to adjust development strategies as new priorities emerge. It is recommended that a coordination structure for poverty reduction be established, chaired by the Ministry of Finance and Economic Planning, and supported by a small technical unit.