January 2021 | Edition No. 16 Protect and Promote Human Capital in a Post-COVID-19 World Rwanda Economic Update Protect and Promote Human Capital in a Post-COVID-19 World January 2021 TABLE OF CONTENTS Acronyms......................................................................................................................................................................................................................... i Foreword.......................................................................................................................................................................................................................... ii Abstract ............................................................................................................................................................................................................................ iii Executive summary...................................................................................................................................................................................................... iv PART I: RECENT ECONOMIC DEVELOPMENTS ............................................................................................................................................... 1 1.1. Introduction .......................................................................................................................................................................................... 2 1.2. Global and Regional Context........................................................................................................................................................... 2 1.3. Rwanda’s Recent Economic Developments .............................................................................................................................. 4 1.4. Medium- to Long-Term Impact of COVID-19 ............................................................................................................................ 13 PART II: SOCIAL AND HUMAN CAPITAL IMPACT OF THE CRISIS........................................................................................................... 17 2.1. Introduction .......................................................................................................................................................................................... 18 2.2. Impact on Poverty and Inequality................................................................................................................................................. 18 2.3. Impact of the Crisis on Health ........................................................................................................................................................ 21 2.4. Impact of the Crisis on Education ................................................................................................................................................. 27 PART III: COVID-19 PANDEMIC – RESPONSE TO PROTECT AND PROMOTE HUMAN CAPITAL............................................... 30 3.1. Introduction .......................................................................................................................................................................................... 31 3.2. Health Response................................................................................................................................................................................... 34 3.3. The Education Response .................................................................................................................................................................. 37 3.4 . The Social Protection Response ..................................................................................................................................................... 39 PART IV: POLICY RECOMMENDATIONS............................................................................................................................................................ 45 4.1. Introduction........................................................................................................................................................................................... 46 4.2. Save Lives: Controlling the Pandemic and Boosting Health System Capacity............................................................... 46 4.3. Protect the poor and most vulnerable......................................................................................................................................... 48 4.4. Strengthen Policies, Institutions, and Investments for Rebuilding Better....................................................................... 50 REFERENCES......................................................................................................................................................................................... 52 ANNEXES............................................................................................................................................................................................... 54 LIST OF FIGURES Figure 1.1: The growth impact of the pandemic ranks among the most severe in Sub-Saharan Africa.................................... 3 Figure 1.2: Real GDP growth in Eastern Africa, including Rwanda’s neighbors................................................................................... 4 Figure 1.3: Rwanda’s GDP contracted in 2020s............................................................................................................................................... 4 Figure 1.4: Rwanda’s GDP growth, services sector, First three quarters of 2020................................................................................. 5 Figure 1.5: Rwanda’s GDP growth, industry, First three quarters of 2020............................................................................................. 6 Figure 1.6: Rwanda’s GDP growth, expenditure side.................................................................................................................................... 6 Figure 1.7: Headline inflation drivers, 2019-20................................................................................................................................................ 7 Figure 1.8: Food prices increased to a 10-year high in the first half of 2020........................................................................................ 7 Figure 1.9: Rwanda’s banking system remains sound.................................................................................................................................. 9 Figure 1.10: Trends in interest rates, 2018-2020 ............................................................................................................................................... 9 Figure 1.11: Imports contracted more than exports in the first half of the year................................................................................... 11 Figure 1.12: Official gross reserves, 2017–20...................................................................................................................................................... 11 Figure 1.13: Tax revenue and expenditures fell in Q2-2020, but grants and net lending rose ....................................................... 11 Figure 1.14: Fiscal deficit widened sharply in FY2019/20.............................................................................................................................. 13 Figure 1.15: GDP Effect in the medium-to-long-term..................................................................................................................................... 15 Figure 1.16: Sectoral effect in the medium-to-long-term............................................................................................................................. 15 Figure 1.17: Fiscal effect in the medium-to-long-term................................................................................................................................... 16 Figure 1.18: Decomposition of Rwanda’s Public Debt, 2007–19................................................................................................................ 16 Figure 2.1: Aggregate household income and consumption in 2020................................................................................................... 18 Figure 2.2: Aggregate household welfare loss in 2020 .............................................................................................................................. 18 Figure 2.3: Aggregate household consumption by income quintile in 2020 .................................................................................... 19 Figure 2.4: Welfare effect in the medium-to-long-term.............................................................................................................................. 19 Figure 2.5: Poverty impact of COVID-19........................................................................................................................................................... 20 Figure 2.6. Evolution of daily confirmed coronavirus cases...................................................................................................................... 21 Figure 2.7: Total cases per million population, November 30, 2020....................................................................................................... 21 Figure 2.8: Daily positivity rate vs. daily number of tests per 1000 population, December 2, 2020 .......................................... 22 Figure 2.9: Total tests per thousand population, November 25, 2020.................................................................................................. 22 Figure 2.10: Infections, males versus females as of November 30, 2020................................................................................................. 22 Figure 2.11: Infections by age as of November 30, 2020.............................................................................................................................. 22 Figure 2.12: Outpatient health facility visits...................................................................................................................................................... 25 Figure 2.13: Patients newly initiated on Antiretroviral treatment (ART)................................................................................................. 25 Figure 3.1: Human capital index (Rwanda in the Africa perspective).................................................................................................... 31 Figure 3.2: Cumulative number of recovered cases and recovery rate................................................................................................. 36 Figure 3.3: Reasons for lack of participation in remote learning (nationally representative, June 2020)................................. 38 Figure 3.4: Differences in modality of remote learning among poor and non-poor households .............................................. 38 Figure 3.5: More rural households are poor, and have lower levels of resilience to regular shocks........................................... 40 Figure 3.6: Poverty headcount ratio................................................................................................................................................................... 43 Figure 3.7: Poverty reduction due to social protections............................................................................................................................. 43 Figure 3.8: Poverty reduction by type of program........................................................................................................................................ 44 Figure 3.9: Beneficiary incidence by social protection program............................................................................................................. 44 Figure 4.1: Relief, restructuring, and resilient recovery............................................................................................................................... 46 Figure 4.2: Share of poor identified—Ubudehe vs. household welfare scorecard........................................................................... 48 LIST OF BOXES Box 2.1: Rwanda COVID-19 Updates as of January 17, 2021................................................................................................................ 23 Box 3.1: Rwanda Economic Recovery Plan................................................................................................................................................. 33 Box 3.2: Early Lessons from Rwanda’s Response to COVID-19............................................................................................................ 37 LIST OF TABLES Table 1.1: Global and regional economic growth ...................................................................................................................................... 2 Table 1.2: Monetary measures in response to the pandemic, selected countries........................................................................... 8 Table 1.3: Balance of payments ......................................................................................................................................................................... 10 Table 1.4: Rwanda’s Public Finances, 2015/16 to 2019/20 ...................................................................................................................... 12 Table 1.5: Scenario Assumptions: COVID-19 heath and economic scenarios for 2021................................................................. 14 Table 2.1: Examples of the impact of disruptions on coverage of essential services..................................................................... 26 Table 2.2: Modeled changes in intervention service coverage and GDP per capita change ..................................................... 26 Table 2.3: Modelled future productivity losses due to additional cases of stunting and nutrition-related child deaths due to the secondary effects of COVID-19, 2020-2021......................................................................................................... 27 Table 2.4: Estimated learning losses in Rwanda ......................................................................................................................................... 28 Table 2.5: Estimate of income losses corresponding to a decline in learning-adjusted years of schooling ......................... 29 Table 3.1: Expansion of the Vision 2020 Umurenge Program (VUP), 2016 to March 2020........................................................... 39 Table 3.2: Scaling up of social safety nets, including emergency cash transfers, in response to the pandemic.................. 42 ACRONYMS BCG Bacille Calmette-Guerin (Vaccine for NAPHS National Action Plan for Health Security Tuberculosis) NBR National Bank of Rwanda BDFs Business Development Funds NCD Non-Communicable Diseases CAD Current Account Deficit NGOs Non-Government Organizations CBR Central Bank Rate NISR National Institute of Statistics of Rwanda CCT Co-responsibility Cash Transfer NPLs Non-Performing Loans CPR Contraceptive Prevalence Rate NSDS Nutrition Sensitive Direct Support cPW Classic Public Works OECD Organisation for Economic Co-operation and DPO Development Policy Operations Development DS Direct Support PER Public Expenditure Review DSSI Debt Service Suspension Initiative PIMA Public Investment Management Assessment DTP Diptheria, Tetanus Toxoids and Pertussis PPP Purchasing Power Parity Vaccine PSNP Productive Safety Net Program EAC East Africa Community R&D Research and Development EICV Integrated Household Living Survey (Enquête RCF Rapid Credit Facility Intégrale sur les Conditions de Vie des ménages in French) REB Rwanda Education Board ELFB Extended Liquidity Facility for Banks REU Rwanda Economic Update ePW Expanded Public Works RSSB Rwanda Social Security Board ERP Economic Recovery Plan RT-PCR Reverse Transcription Polymerase Chain Reaction EYRS Expected Years of Schooling Rwf Rwandan Franc FY Fiscal Year SACCOs Savings and Credit Cooperatives GDP Gross Domestic Product SAM Social accounting matrix GoR Government of Rwanda SARS Severe Acute Respiratory Syndrome GPE Global Partnership for Education SBCC Social and Behavior Change Communication HCI Human Capital Index SMS Short Message Service HIPC Highly Indebted Poor Countries Initiative SOEs States Owned Enterprises HLO Harmonized Test Scores SSA Sub-Saharan Africa HWS Household Welfare Scorecard SSN Social Safety Net IMCI Integrated Management of Childhood TFP Total-Factor Productivity Illnesses TV Television IMF International Monetary Fund TVET Technical and Vocational Education and JEE Joint External Evaluation Training LARS Learning Assessment System UN United Nations LAYS Learning-Adjusted Years of Schooling UNESCO United Nations Educational, Scientific and LiST Lives Saved Tool Cultural Organization LODA Local Administrative Entities Development UNICEF United Nations Children's Fund Agency US$ United States dollar LTSS Long-Term Savings Scheme USAID United States Agency for International MICE Meetings, International Conferences and Development Events VAT Value-Added Tax MINALOC Ministry of Local Government VUP Vision Umurenge Program MINECOFIN Ministry of Finance and Economic Planning WHO World Health Organization MINEDUC Ministry of Education Y-O-Y Year-On-Year Rwanda Economic Update • Edition No. 16 i FOREWORD The Rwanda Economic Update (REU) analyzes recent economic developments and prospects, as well as Rwanda’s policy priorities. The REU is intended for a wide audience of policymakers, business leaders, other market participants, analysts of Rwanda’s economy, and civil society. It draws on data reported by the Government of Rwanda and additional information collected by the World Bank Group in its regular economic monitoring and policy dialogue. Published twice a year, each issue has a special feature spotlighting a particular topic. The 16th edition of REU focuses on the impact of COVID-19 on human capital in Rwanda. The current edition, led by Calvin Zebaze Djiofack and Peace Aimee Niyibizi, is a collective endeavor and involved staff from several parts of the World Bank. The Social Protection and Jobs team, led by Ramya Sundaram, includes Erwin Tiongson, Florentin Philipp Kerschbaumer, Silas Udahemuka, and Iftikhar Malik. The Health, Nutrition & Population (HNP) team, led by Miriam Schneidman, includes Patrice Mwitende, Jonathan Kweku Akuoku, Gil Shapira, Tashrik Ahmed, Rwema Jean De Dieu Rusatira, and Ali Winoto Subandoro. The Education team, led by Huma Kidwai, includes Kabira Namit, and Lillian Mutesi. The Global Macro-Modelling team, led by Hasan Dudu, includes Lulit Mitik Beyene, and Luc Savard. Other team members were William Shaw, Karen Stephanie Coulibaly, John Ashton Loeser, Florence Kondylis, Saahil Ninad Karpe, Himanshi Jain, Hugues Champeaux, Clement Joubert, and Melis Guven. The team is very grateful to Philip Schuler and Allen Dennis for additional inputs on the structure and messaging of the report. The team benefited from invaluable support and inputs from Vivek Suri (Practice Manager, MTI), Paolo Belli (Practice Manager, Social Protection AFR E2), Muna Salih Meky (Practice Manager, Education Africa), and Francisca Ayodeji Akala (Practice Manager, Health AFR E2), who supervised the preparation of different aspects of the report. Rolande Simone Pryce (Country Manager, Rwanda) and Keith E. Hansen (Country Director for Kenya, Rwanda, Uganda, and Eritrea) provided overall guidance. The team is grateful to Laura B. Rawlings, Apurva Sanghi, Syud Amer Ahmed, Cesar Calderon, Patricia Geli Megumi Kubota, and Juan Carlos Parra Osorio for their comments and advice on earlier drafts. The team benefitted from support from Nancy Umwiza (Team Assistant) for providing logistical support, Rogers Kayihura (Communication Officer) for managing communication and dissemination, and Robert Waiharo for design and layout of the report. The REU team is grateful to the Ministry of Finance and Economic Planning (MINECOFIN), the National Statistics Institute of Rwanda (NISR), the National Bank of Rwanda, the Ministry of Local Government (MINALOC), the Local Administrative Entities Development Agency (LODA), the Rwanda Social Security Board (RSSB), and Ministry of Health for providing the data which made this work possible, and for their insights and comments. We also thank other stakeholders, including FinMark Trust and Access to Finance Rwanda (specifically Ephrem Rutagarama) for access to summary FinScope data, and Give Directly for their support with data. Views expressed in the REU are those of the authors and do not necessarily reflect the views of the World Bank Group, its Executive Directors, the countries they represent, or the Government of Rwanda. ii Rwanda Economic Update • Edition No. 16 ABSTRACT The lockdown, social distancing, and increased costs associated with the COVID-19 pandemic have reduced output and employment, increased poverty, and depressed trade transactions; in the absence of a strong response by government, output will be lower over the next decade due to COVID-19. The pandemic-driven rise in the fiscal deficit is increasing public debt, thus exacerbating existing challenges to sustainability and increasing the urgency of shifting from large public investments to human capital development as the main driver of growth. The government’s rapid response to the pandemic has succeeded in keeping the population share of new infections and of deaths well below that of most other countries. However, critical health services, particularly childhood immunization and nutrition services, have been disrupted, which is increasing stunting and preventable diseases. The combination of poorer nutrition, limited health services, learning losses from school closures, and the likelihood that some children (particularly adolescent girls and children from poor households) may never return to school will reduce incomes and productivity over the medium term. The government responded rapidly and effectively to the challenges posed by the pandemic, putting in place the Economic Recovery Plan (ERP) to support households and firms, quickly imposing constraints on mobility to limit the spread of the disease, ramping up social protection programs, and setting up remote learning. Key priorities going forward include: (i) improving the government’s expenditure allocation, financial management and revenue mobilization; (ii) strengthening the resilience of the health system and preparing for administration of a vaccine; (iii) reducing learning losses (targeting the most vulnerable), improving skills and strengthening accountability in education; and (iv) expanding the flagship social safety net program, building adaptive systems to respond quickly to shocks, improving poverty targeting of safety net programs, and scaling up the use of digital payments. Rwanda Economic Update • Edition No. 16 iii EXECUTIVE SUMMARY COVID-19 has pushed Rwanda’s economy into its sustainability in Rwanda. Rwanda’s public debt first contraction since 1994 and onto a slower long- has risen steadily since 2013 and amounted to term growth trajectory 58.1 percent of GDP at end 2019 (that is, before The lockdown and social distancing measures, the pandemic). The pandemic-driven deterioration which were critical to limiting infections, sharply in output and export growth, accompanied by curtailed economic activities. GDP in real terms fell increased borrowing needs, has resulted in a further by 3.6 percent (y-o-y) in the third quarter of 2020, deterioration in Rwanda’s debt position. The cost of following a 12.4 percent contraction in the second the Economic Recovery Plan initiated to mitigate quarter. GDP is estimated to have dropped by 0.2 the economic impacts of COVID-19 is estimated at percent for 2020, compared to a projected expansion US$900 million over the two fiscal years 2019/20 of 8 percent before the COVID-19 outbreak. While the and 2020/21, which is equivalent to about 4.4 pandemic affected all major sectors, education and percent of GDP on average per year. Public debt is Rwandan strategic sectors (travel and hospitality) now estimated to have reached nearly 66 percent declined the most. The employment to population of GDP in 2020, or about 6 percentage points ratio fell by 5 percent during the lockdown from higher than anticipated in REU-15 end of 2019. February to May 2020. Unemployment soared over Accordingly, the June 2020 Debt Sustainability this same period from 13 to 22 percent of the labor Analysis revised the risk rating of debt distress from force, while nearly 60 percent of workers who kept “low” to “moderate”. their jobs through the lockdown reported receiving lower salaries. In the absence of major policy intervention, Rwanda’s long-term growth is likely to be significantly lower than the pre-pandemic trajectory. A quick recovery in Rwanda’s strategic growth sector (MICE) is unlikely due to the continued prevalence of COVID-19 in the developed economies, as well as a fear factor that will probably continue after the crisis. Further, there is considerable potential for a lasting impact on capital accumulation and productivity, as observed in similar crises in the past. In the absence of robust policy intervention, disruptions in the health and education systems and a deterioration in the level Monetary policy has strongly supported of human capital more generally (see Huber, Finelli, economic activity and financial sector stability. and Stevens 2018) are likely to continue to depress The National Bank of Rwanda reduced the reserve economic activities after the pandemic. requirement ratio, introduced an extended lending facility to support banks facing liquidity shortfalls, The combined effect of reduced revenue reduced the waiting period for the treasury bonds mobilization due to the disruption of activities rediscounting window, and allowed banks to and increased government spending to respond restructure loans to borrowers facing temporary to the crisis have exacerbated challenges to debt cash flow challenges. Banks remained in sound iv Rwanda Economic Update • Edition No. 16 Executive Summary condition, based on the share of non-performing made significant pre-COVID investments in its loans in their portfolios and capital risk-weighted flagship safety net, Vision 2020 Umurenge program assets ratio, but newly approved loans were 9.2 (VUP), including an expansion in the number of percent lower in October 2020 compared to the beneficiaries through human capital-focused same period in 2019. innovations. When the pandemic hit, Rwanda’s social protection system responded immediately, The pandemic will lower household welfare in both by scaling up safety nets, including emergency the short and long term transfers. Simulations suggest that, expansions The crisis is dramatically increasing poverty in both in safety nets since 2016, including the scaling up rural and urban areas. The headcount poverty rate between March and September 2020, will achieve is likely to rise by 5.1 percentage points (more than up to a 1.43 percentage point reduction in poverty 550,000 people) in 2021, compared to the no-COVID in 2020. If the government continues further scenarioi. The increase in urban areas is greater than expansion, and fully achieves the targets set out the increase in rural areas, as the agriculture sector in the Economic Recovery Plan, social safety nets is less affected by the pandemic than are services could reduce poverty by up to 1.75 percentage and manufacturing. However, the number of new points in 2021. poor households in the rural area is 3.2 times higher than the number of new poor in the urban area in Poverty mitigation through social safety nets 2021, because initially more than 90 percent of poor could be further improved by choosing the right people live in the rural area. set of instruments. Some instruments are more affordable, and others can be deployed more The impact of COVID-19 disproportionately affects efficiently for a timely response. Simulations show women in Rwanda. The employment to population that the social protection instruments deployed ratio decreased by 5 percentage points from 48.3 to to respond to negative effects of the pandemic 43 percent through the lockdown period, with larger vary considerably in their coverage, targeting decreases among female workers (6.2 percentage performance, and cost-effectiveness. The nutrition points versus 4 percentage points among male sensitive direct support (NSDS) program reaches workers). This is in part because (according to poor and vulnerable households with pregnant the recent labor market survey) women are more women or children under the age of 2 and covered likely to be seasonal workers (44 percent versus 31 30,000 beneficiary households by March 2020. The percent) and more likely to be taking care of a sick number of beneficiaries of NSDS more than doubled relative (4 percent versus 1 percent). between March and September 2020. This NSDS, together with the Direct Support (DS) program, Effects of the pandemic may be felt for years. The aimed at the extreme poor, reduced poverty by legacy of the pandemic and the likely lower post- 0.73 percentage points in 2020. The public works pandemic growth path means that in the absence programs (including the classic and expanded public of robust interventions, GDP by 2030 would be 22 works) reduced poverty by 0.51 percentage points. percent lower in the baseline than in a scenario While no significant expansion occurred in the public without COVID. work programs between March and September 2020, existing beneficiaries continued to be paid even if Rwanda’s social protection system responded they could not work due to containment measures quickly and helps mitigate the increase in poverty of the pandemic. Emergency cash transfers, while Rwanda’s social protection system was well mitigating the plight of urban households hit hard prepared to respond to the pandemic. Rwanda by the shock, resulted in little poverty reduction – Rwanda Economic Update • Edition No. 16 v Executive Summary some 0.2 percentage points in 2020. The objective of emergency cash transfers includes asset replacement, and they potentially play the role of an unemployment benefit, in ensuring that those who lose their livelihood have some replacement income to bounce back once the pandemic recedes. The government’s swift and efficient response to the pandemic has largely mitigated the potentially significant negative impact on essential health and nutrition services The government took decisive actions to control the disease. The government established multi- sectoral structures and an effective plan for managing the pandemic. The rapid adoption of a Progress is essential in improving preparedness six-week national lockdown, closure of borders, and the response to infectious diseases and remaining restrictions on mobility, supported The government has taken critical measures to by stringent enforcement and an effective bolster outbreak preparedness and strengthen communications program to support compliance, health security, but more needs to be done. have kept rates of infections and deaths much lower Rwanda was ranked 117 out of 195 countries in an than in most other countries. And per capita tests index measuring global health security capabilities. are high given Rwanda’s low positivity rate, a key The country received the highest score in East Africa metric of performance in controlling the pandemic. (albeit well below the best-performing countries outside the region) in the 2018 Joint External Rwanda has experienced some disruptions in Evaluation (JEE), which assessed capacity to prevent, the delivery of health services, but these appear detect, and rapidly respond to public health threats. to be largely transitory. The immunization Based on the JEE results, Rwanda prepared a program and other child services appear to National Action Plan for Health Security (NAPHS), have been disrupted, with children missing key with a prioritized set of interventions. However, the appointments. The number of children vaccinated government has not developed a sustainable, long- for Bacillus Calmette–Guérin (BCG), Penta3 and term financing plan to support preparedness. Polio3 was lower than expected, with Penta3 and Polio3 experiencing an initial decline of 10 percent The closure of schools is likely to lead to substantial (May 2020) and additional drops of 10 percent (June learning losses, especially among girls and the poor 2020) and 4 percent (July 2020). Enrolment is likely to be lower when schools reopen. The government moved quickly to close The government’s response has limited the schools (seven days after the first recorded COVID disruption to health and nutrition services. case in Rwanda); an estimated 3.5 million students However, without continued measures to ensure have been out of school since the pandemic began. coverage of nutrition and health services to Studies find that fewer children return to school vulnerable households, increased adverse nutrition after experiencing interruptions in education. outcomes may lead to significant losses in future Data of National Institute of Statistics of Rwanda adult productivity among young children who are (NISR) indicate that the share of students in total impacted today. employment increased from 3.4 percent in February vi Rwanda Economic Update • Edition No. 16 Executive Summary 2020 to 8.8 percent in August. Adolescent girls, The protection and improvement of human particularly those from poor households, may be capital would require decisive actions in i) saving particularly at risk of exclusion, given the recent lives; ii) protecting the poor and vulnerable; increase in teenage pregnancies. Enrolment in and iii) strengthening policies, institutions, and private school also may fall with the drop in income, investments for building back better while many schools may close as the fall in revenue Saving lives forces them to relinquish rented premises and increases their risk of defaulting on loans. Accelerating deployment of COVID-19 vaccines is the single most important measure to contain The government quickly instituted a multi- the pandemic. Key steps are to strengthen primary pronged approach to providing remote lessons, health care facilities to screen for co-morbidities, although challenges to access remote learning develop clear criteria for who will be prioritized for in Rwanda are significant, particularly for the vaccine, elaborate a roll-out plan with different children from poor backgrounds. Lack of access to scenarios to reflect differences among candidate television, radio, the internet, educational programs vaccines, pilot different strategies and platforms to or learning materials were important reasons for be used, provide for close coordination between failure to participate in remote learning. Students the ministries of health and finance to manage the from households with greater levels of connectivity, budgeting process, set up adequate information higher levels of parental education, greater systems and supervision of the program, provide availability of parental time for engagement, and in- training and technical assistance, prepare for risk home availability of books and materials are better communication and community engagement, and able to benefit from distance learning programs. plan for equipment, storage, transport and human Learning losses in households without radios (26 resources requirements. percent of households) or television (90 percent) are likely to be sizeable. Measures are necessary to improve preparation for and management of health crises. The use School closures can reduce learning and of serological surveys, testing blood donations, productivity in the long run. School closures can and leveraging molecular diagnostics (such as lead to an increase in grade repetition and, in the the GeneXpert for COVID-19 testing in remote long run, to lower educational attainment. Our areas) would strengthen monitoring of infections estimates based on historical precedents and human and further optimize testing. Improvements in capital index (HCI) 2020 data suggest that expected the physical environment at health facilities to years of schooling may decline between 0.3 to 0.7 minimize the risk of disease transmission and years, from a baseline of 6.9 years. Similarly, learning protect health workers; expanding the use of adjusted years of schooling may decline between innovative technologies to disseminate information and perform telemedicine consultations; 0.2 to 0.6 years, from a baseline of 3.9 years. It is likely strengthening community platforms involved in that children from poor and vulnerable households early detection and treatment of childhood illnesses will experience the largest declines in learning after a and malnutrition; scaling up income support, food break in schooling. And students whose families are distribution and other social safety net measures for less able to support out-of-school learning will face vulnerable households; improving the monitoring larger learning losses than their more advantaged of the nutritional status of women and children peers. The present value of the economic losses to using digital tools; and increasing the completeness Rwanda may reach US$0.055 trillion. and timeliness of health data reported by public and faith-based health facilities. Rwanda Economic Update • Edition No. 16 vii Executive Summary The National Action Plan for Health Security the Ejo Heza scheme. Continuously monitoring the urgently requires financing. This plan, based performance of the Ejo Heza scheme, improving on the 2018 Joint External Evaluation, includes design parameters based on such monitoring, and a set of prioritized interventions based on a One efforts to expand coverage will also need to continue. Health, whole of government approach. The cost Finally, it would be important for the government is estimated at US$61.5 million (US$12.3 million/ to set in place adaptive social safety nets that can year or roughly US$1 per person), which is small be systematically scaled up during shocks, whether compared to the costs associated with the loss of climactic, pandemic, or of a different nature. lives and livelihoods associated with pandemics. To enhance prospects for sustainability, it is preferable Return all children to school safely and recover to generate domestic financing, perhaps through learning losses efficiency gains in taxation and/or earmarked taxes, Sustained and targeted efforts are necessary to engaging private sector firms and incorporating facilitate safe school reopening, reenroll students, metrics of country readiness to deal with pandemics and recover learning losses. Priority is to ensure in national plans to attract foreign investors. health and safety of students and teachers which needs a careful implementation of the Education Protecting the poor and vulnerable Sector Response Plan to the COVID-19 with a clear To combat the poverty impact of COVID-19 fully in focus on minimizing transmission for uninterrupted the short and long term, sustained improvements return to school. Tracking and reenrollment of to the VUP, as well as expanding social insurance students could be further supported by rigorous to the informal sector, will be critical. First, back-to-school campaigns or drives, subsidies to further expansion in the coverage of the VUP is cover school feeding and other out-of-pocket costs, warranted. There is a large increase in the number and by focused attention on vulnerable groups such of poor households due to the pandemic, in the as girls, the poor, and children with disability. Focus short as well as medium term. These households on teacher retention is important to sustain service will continue to need support. Second, because of delivery and reduce attrition related costs. School fiscal constraints, social protection resources will reopening after such prolonged closure comes with need to be used more efficiently, by improving no guarantee of recovering or improving learning the targeting accuracy of programs. The use of unless focused interventions are adapted to deliver a more objective targeting system based on the remedial support to at-risk students. Efforts must household welfare scorecard is an important step in this direction. Third, scaling up the use of digital cash transfers could help create a more responsive, safe and efficient delivery of social protection, particularly when physical mobility is restricted. Though its use remains unequally distributed, the use of mobile money has risen steadily in recent years and is used by nearly everyone in urban areas. Fourth, given the size of those employed informally, and the effects of the pandemic on this segment of the population, it would be important to continue to invest in expanding social insurance. Rwanda is already advanced in setting up a long-term savings scheme for those in the informal sector – viii Rwanda Economic Update • Edition No. 16 Executive Summary also include curricular adaptations and rapid and more fiscal risk analysis and management, publishing frequent learning assessments with clear system- more fiscal reports, and strengthening the oversight level guidance to teachers. Building the capacity and management of SOEs and PPPs. of teachers and school leaders to effectively adapt to the rapidly changing context of learning needs Strengthening infrastructure will be essential and methods is critical in achieving results related to achieve a sustained improvement in human to learning and market relevant skills. Effective use capital. For example, a reliable supply of electricity of technology in remote learning systems, in early- and greater access to high speed internet would not warning systems to prevent dropout, and in making only increase the efficiency of remote learning but learning more engaging and retainable could bring also help to reduce inequalities in access to better in transformational changes in the sector. Strategic education tools. More broadly, increasing access inputs for raising parent engagement could promote to, and use of, broadband internet will be critical equity in student participation and achievement. to accelerate the structural transition to a more productive, modern economy. Strengthening policies, institutions, and investments for building back better Improving education systems with greater capacity, sub-sector coordination, and linkage While expansionary policies are necessary to outcomes in learning and employability to mitigate the impact of the pandemic, over is necessary for rebuilding and resource the medium-term increased revenues and improved expenditure control is necessary to optimization. Effective coordination and utilization ensure sustainability and to support human of resources is just as important as leveraging capital development. Steps to strengthen revenue additional support to sustainably finance the mobilization include unwinding tax measures emerging sector needs at scale. Stronger alignment undertaken to mitigate the impact of the crisis and of accountability structures to learning outcomes continuing with the development of a medium-term and other key impact indicators, with efficient revenue strategy (including a VAT gap analysis), an reporting of data utilized for timely feedback, could assessment of tax expenditures, and an overall trigger transformational changes in helping the diagnostic of the policy and legislative framework, sector build back better. Focus on identifying and as agreed in the IMF’s Three-Year Policy Coordination nurturing skills responsive to market needs and the Instrument approved in June 2019. Further efforts national economic priorities could minimize the to implement transparent and credible financial projected productivity losses in the medium and management practices could involve undertaking long term. Rwanda Economic Update • Edition No. 16 ix PART ONE RECENT ECONOMIC DEVELOPMENTS Rwanda Economic Update • Edition No. 16 1 Recent Economic Developments 1.1. Introduction 1.2. Global and Regional Context The lockdown, social distancing, and increased The COVID-19 pandemic has spread across the world costs associated with the pandemic have severely and continues to play out. The COVID-19 pandemic, depressed economic activity. In April-June 2020, which emerged in December 2019, is inflicting a Rwanda’s GDP fell by 12.4 percent, unemployment substantial toll on economies and societies. The increased sharply, and earnings of employed number of confirmed cases climbed to above 62 workers fell. GDP is estimated to have dropped by million by end-November, with more than 1.4 0.2 percent in 2020, compared to a forecast of 8 million deaths.1 Sub-Saharan has so far recorded a percent growth before the pandemic hit. Rising food smaller number of confirmed cases and deaths than prices have boosted inflation, which has been above expected. After experiencing a surge in August the central bank’s range since February. Exports 2020, the number of confirmed cases in Rwanda dropped sharply in volume and value in April-May has declined sharply. Overall, the daily new cases 2020, particularly services exports which plummeted in Rwanda have been considerably lower than in with the closure of borders and reluctance to travel. some of the most affected countries in Africa (e.g. However, imports fell by more than exports in dollar Ghana, Kenya). terms, so that the current account deficit improved, while increased inflows of foreign assistance led to The global economy has sunk into deep recession a rise in reserves. Authorities took strong measures in 2020, with uncertainty about the pace of to support households and firms during the crisis recovery. COVID-19 hit hard an already weak and through easing monetary policy and increasing fragile world economy, with the slowest growth expenditures. Higher expenditures and lower tax in 2019 since the global financial crisis of 2008/09. revenues led to a rise in the overall fiscal deficit from Mobility restrictions needed to slow the spread of 5.6 percent of GDP in FY2018/19 to 9.4 percent in the pandemic in the first half of 2020 significantly 2019/20. COVID-19 is expected to reduce GDP over reduced global demand and supply, and increased the long-term, compared to a counterfactual scenario vulnerability in financial markets. And the recent where the pandemic never occurs. Depending on resurgence of the virus, leading to renewed lockdowns policy effectiveness and the length of the crisis, and reduced mobility in several major economies, simulations using a computable general equilibrium has slowed the pace of the recovery. According to the model indicate that the size of the economy may be World Bank’s Global Economic Prospects (Jan. 2021), between 16 percent and 30 percent lower in 2030 the global economy is estimated to have contracted due to the pandemic. The fiscal deficit is likely to 4.4 percent in 2020, with a 5.4 percent fall in advanced increase in absolute terms and in percentage of GDP, economies and 3.0 percent contraction in emerging and debt to remain high, through 2025. markets and developing countries. Global GDP is Table 1.1: Global and regional economic growth (percent) 2018 2019 2020e 2021f 2022f World 3.0 2.4 -4.4 4.0 3.7 Advanced economies 2.1 1.6 -5.4 3.2 3.4 Emerging market and developing economies 4.3 3.5 -3.0 5.2 4.2 Sub-Saharan Africa 2.6 2.2 -3.6 2.4 3.1 Source: World Bank Global Economic Prospects (Jan 2020) WHO (World Health Organization). 2020. 1 2 Rwanda Economic Update • Edition No. 16 Recent Economic Developments forecast to expand 4.0 percent in 2021, predicated commodity exporters and those inserted in global on effective vaccination limiting the community value chains) are suffering the biggest blows from spread of COVID-19 in many countries, central banks the pandemic. Rwanda is one of the most affected maintaining financial stability, and fiscal policy countries in SSA (Figure 1.1) due to more stringent remaining supportive in major economies. measures imposed to contain the pandemic and the economy’s high reliance on travel and hospitality, The economic and social disruptions brought which has been considered to be a strategic growth about by COVID-19 have reduced global trade sector in recent decades. Yet, intraregional trade is substantially. The fall in demand, as well as severe already playing a role in mitigating the economic disruptions to global value chains, reduced world effects of the pandemic in SSA. Intra-African trade trade by 8 percent in the first eight months of 2020, had been gradually rising prior to the COVID-19 compared to same period in 2019.2 Global tourism pandemic, and most of the intra-African trade — an important source of export receipts for many flows typically take place within regional economic economies — has also plummeted. World Tourism communities, thanks to lower tariffs among member Organization data show that international tourist countries. Economies in SSA have seen their fiscal arrivals (overnight visitors) declined 70 percent in pressures rise as governments have increased the first eight months of 2020 over the same period spending (including on health services and cash of last year, which translates into a loss of US$730 transfers) amid contracting revenue collections billion in export revenues from international tourism. on the back of discretionary tax cuts (to support economies) and weakening economic activity. Sub-Saharan African economies are likely to contract in 2020 for the first time in decades. The pandemic has intensified vulnerabilities in the According to the October 2020 Africa’s Pulse, SSA region. COVID-19 could push up to 40 million economic activity in the region is expected to people into extreme poverty, erasing at least five contract by 3.6 percent in 2020, the region’s first years of progress in fighting poverty. And school recession in a quarter-century. Countries in the closures are affecting nearly 253 million students, region with higher exposure to global trade (that is, potentially causing severe losses in learning. Figure 1.1: The growth impact of the pandemic ranks among the most severe in Sub-Saharan Africa (percentage point difference between pre-COVID and recent forecast of GDP) Equatorial Guinea Guinea-Bissau Mozambique Burkina Faso Cote d'Ivoire Sierra Leone South Africa Madagascar Congo, Rep. Cape Verde Zimbabwe Mauritania Congo, DR Cameroon Seychelles Botswana Mauritius Comoros Tanzania Namibia Eswatini Ethiopia Rwanda Lesotho Uganda Senegal Burundi Gambia Zambia Angola Malawi -0.8 Guinea Nigeria Gabon Liberia Ghana Sudan Kenya Benin Niger Chad Togo Mali 0 -1.7 -3.3 -5 -3.5 -3.6 -4.0 -4.1 -4.3 -4.7 -5.1 -5.2 -5.4 -5.5 -5.5 -5.6 -5.7 -6.0 -6.1 -6.2 -6.2 -6.3 -6.5 -6.7 -6.8 -7.0 -7.0 -7.0 -7.1 -7.3 -7.5 -7.8 -8.0 -8.0 -8.1 -8.3 -10 -8.7 -8.9 -11.8 -12.7 -13.2 -13.5 -15 -16.7 -20 -19.2 -25 Source: WBG staff estimates 2 CPB Netherlands Bureau for Economic Policy Analysis. https://www.cpb.nl/en/worldtrademonitor Rwanda Economic Update • Edition No. 16 3 Recent Economic Developments Growth in Sub-Saharan Africa is expected to rebound percent and 3.6 percent y-o-y in the second and only moderately to 2.4 percent in 2021, which is only third quarters of 2020, respectively (Figure 1.3). This a little more than the 2.2 percent rate achieved in makes a 4.3 percent GDP contraction in the first three 2019 and below the population growth rate. By the quarters of 2020. Even after the lockdown period, end of 2021, the region’s real gross domestic product social distancing provisions of varying stringency (GDP) per capita will likely regress to its level in 2007. remain in place, while businesses continue to incur fixed and variable costs to adhere to new safety, The pandemic has reversed previously strong hygiene, and social distancing norms. Although some growth in the East African Community (EAC). After early indicators point to recovery in October 2020 reaching 4.8 percent on average in 2019, GDP growth (the NBR’s annual composite economic index rose by in EAC has declined. Growth is estimated to remain 2.8 percent), the pace of economic activity is still too positive in Tanzania, Uganda and Burundi in 2020, low to compensate for the loss recorded in the first while the GDP of Kenya, Rwanda and South Sudan is three quarters of 2020. This weak recovery and the estimated to have fallen (Figure 1.2). Most countries resurgence of the pandemic in major economies led have also put in place fiscal and monetary policy the government to estimate a decline in GDP by 0.2 countermeasures to protect vulnerable households percent for 2020, the first recession in more than two and support firms through the crisis. Growth will decades. This compares to an expansion of 8 percent likely start recovering across Eastern Africa from 2021 anticipated before the COVID-19 outbreak. The more onward as COVID-19 infections are contained, supply than eight percentage points difference between chains normalize, and domestic demand picks up. the pre-COVID and recent forecast for GDP growth in 2020, the third largest of such difference for any 1.3. Rwanda’s Recent Economic Developments low-income country in Africa and the 8th largest on Rwanda’s economy has been hit hard by the COVID-19 the continent, is one indicator of the severity of the pandemic pandemic’s impact in Rwanda (Figure 1.1). The Rwandan economy is likely to face its first recession over the last two decades in 2020. The Employment and salaries fell sharply in Rwanda widespread lockdown that ran from March 22 to May through the lockdown period. Between February 3, as well as subsequent localized ones, paralyzed and May 2020, aggregate employment fell by nearly all forms of economic activity. GDP fell by 12.4 370,000, or by about 10 percent. The employment Figure 1.2: Real GDP growth in Eastern Africa, including Figure 1.3: Rwanda’s GDP contracted in 2020s Rwanda’s neighbors (percent) (percent) 15 20 9.4 15 10 6.8 6.9 5.8 5.5 5.7 5.4 10 4.8 COVID-19 5 4.4 2.92.8 2.5 1.8 2.0 2.1 1.5 5 0.3 0 0.0 -0.2 -0.3 3.5 2.5 -1.0 -1.7 0 0.3 -1.0 -5 Droughts & scal -4.8 -3.6 Financial Crisis consolidation -5 Aid crisis Global -10 -10 -15 -13.6 -12.4 -15 EAC Uganda Tanzania Burundi Rwanda Kenya South DRC Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Sudan 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2019 2020e 2021f Quarterly GDP growth Average 4-Q growth Source: World Bank Global Economic Prospects Source: National Institute of Statistics of Rwanda (NISR) Note: e = estimate; f= forecast 4 Rwanda Economic Update • Edition No. 16 Recent Economic Developments to population ratio fell from 48.3 to 43 percent, Figure 1.4: Rwanda’s GDP growth, services sector, First three quarters of 2020 with larger declines among female workers (percentage changes, year-on-year) (6.2 percentage points, versus 4 percentage Education -42.6 points among male workers) and workers in Hotels & restaurants -39.3 Transport urban areas (nearly 10 percentage points, versus 4 -25.1 Maintenance & repair of motor vehicles -11.8 percentage points in rural areas). Not surprisingly, Financial services -5.4 unemployment soared over this same period, from Professional and administrative services -4.3 Wholesale & retail trade -4.0 13 to 22 percent of the labor force. On average, nearly Real estate activities -2.0 60 percent of workers who kept their jobs through Cultural, domestic & other services -1.2 Public administration services 3.8 the lockdown reported receiving lower salaries Human health & social work activities 13.5 during the lockdown. Employment recovered from Information & communication 35.9 May to August, and the employment to population -50 -40 -30 -20 -10 0 10 20 30 40 rate is back to its pre-lockdown level. However, an Source: NISR increase in labor force participation has meant that and transport, which, in total, account for about 20 unemployment rate remains elevated, albeit lower percent of GDP (Figure 1.4). In contrast, financial, than the peak in May. Annex I provides further real estate, and other services, where many activities information on these trends. can be carried out remotely, fell by less than 6 percent in the first three quarters. Information The services sector was hard hit by the COVID-19 and communication services increased by 35.9 pandemic, due to mobility restrictions and percent, supported by the move to work-from-home personal avoidance behavior. The services sector arrangements, while demand for human health- contracted by 6.3 percent in the first three quarters related services also rose. of 2020, as a growth slowdown in the first quarter was followed by a sharp contraction in both second Major industrial sectors have contracted. Total and third quarters. Rwanda has had some success industrial output fell by 6.4 percent y-o-y in the first in developing its MICE (Meetings, International three quarters of 2020 as a growth slowdown in the Conferences, and Events) industry in recent years.3 first quarter was followed by a sharp contraction However, travel restrictions with the outbreak of of nearly 19 percent in the second and of nearly 2 COVID-19 reduced visitor arrivals to almost zero in percent in the third quarter.4 The construction sector April 2020, and the hotel and restaurant subsector contracted by 7.2 percent in the first three quarters dropped by 39.3 percent in the first three quarters of 2020 (Figure 1.5), as the lockdown slowed work of the year. Half of the government’s Rwf100 billion and reduced the availability of supplies (the y-o-y Economic Recovery Fund for the private sector was growth rate also was depressed because some large- allocated to the Hotel Refinancing Window. Available scale public infrastructure projects were realized in data indicate that 82.6 percent of the allocated funds the same period of 2019). Output in manufacturing have been disbursed as of September 2020. Other (comprising food, beverage, manufacturing of severely affected subsectors included education construction materials) dropped by 0.4 percent in (with the closure of schools from March to October), the first three quarters of 2020, reflecting the tight retail and wholesale trade, maintenance and repair, linkage with the performance in agriculture and 3 According to the International Congress and Convention Association, Kigali was ranked Africa’s 2nd most popular conference destination 4 This is be compared to an 18.3 percent expansion in the same period of before the COVID-19 outbreak. 2019. Rwanda Economic Update • Edition No. 16 5 Recent Economic Developments construction, as well as large disruptions in trade in mounting job losses (885,000 people stopped and global value chains. The 35 percent collapse working in April)8, reducing the incomes of firms and in mining output (Figure 1.5) was driven by the workers. This led to a drop in private consumption continuing drop in tin prices, to a four-year low in in Q2-2020, and Q3-2020. The closure of schools and mid-March.5 borders, coupled with many civil servants working from home, reduced government consumption Agriculture was constrained by both the COVID-19 of goods and services (e.g. office supplies, water, pandemic and unfavorable weather conditions. energy, repairs and maintenance and travel). After growing by 5.0 percent in 2019, agricultural Investment fell in both second and third quarters, output remained constant in the first three quarters after some increase in the first quarter, with sharp of 2020, as heavy rains and floods during the declines in investment in transport equipment and first agricultural Season A6 destroyed part of the other machinery (due to reduced manufacturing, production of some important food crops. Food mining and transport activities) and investment in production shrank by 0.5 percent in the first three construction, as well as a fall in government capital quarters of 2020. Output of Rwanda’s crop exports expenditure. Exports expanded by 5.9 percent contracted by 12.7 percent in the first three quarters in the third quarter, but this was not enough to of 2020, mainly driven by lower coffee production. offset a substantial decline recorded in the second By contrast, the livestock subsector benefitted from (-24.4 percent, y-o-y), resulting in a 1.6 percent higher fodder production and government efforts to contraction in the first three quarters of 2020. The improve animal health and production.7 adverse effect on GDP growth was eased by an equally pronounced fall in imports. Since imports All major expenditure categories of the national are considerably larger than exports, net exports income accounts were impacted by the COVID-19 made a positive contribution to GDP growth in the pandemic (Figure 1.6). Mobility restrictions resulted second and third quarters. Figure 1.5: Rwanda’s GDP growth, industry, First three Figure 1.6: Rwanda’s GDP growth, expenditure side quarters of 2020 (percent, year-on-year) (percentage changes, year-on-year) -2.7 Private expenditure -1.5 Mining & quarrying -35.4 7.0 5.9 Government expenditure -17.6 14.9 Construction -7.2 -14.3 Investment -34.2 5.5 5.9 Manufacturing -0.4 Export -24.4 13.0 -0.2 Imports -18.3 Electricity, water & waste management 1.0 23.4 -40 -30 -20 -10 0 10 20 30 -40 -35 -30 -25 -20 -15 -10 -5 0 5 2020Q3 2020Q2 2020Q1 Source: NISR Source: NISR 5 World Bank Group, Commodity Markets Outlook, April 2020 https://openknowledge.worldbank.org/bitstream/ handle/10986/33624/CMO-April-2020.pdf?sequence=9&isAllowed=y 6 Rwanda has three agricultural seasons, mostly conditioned on rainfall: Season A, September through February; Season B, March through June; and Season C, July through September. 8 According to the Labour Forces Survey of Q2-2020 (May 2020): https:// 7 The FY2019/20 Budget execution report. www.statistics.gov.rw/datasource/labourforce-survey-2020 6 Rwanda Economic Update • Edition No. 16 Recent Economic Developments Rising food prices have increased inflation in 2020 September) and the more recent rise in transport Inflation has remained high during the pandemic. prices (22.4 percent in September).9 Accounting While the pandemic may have increased prices for about 27 percent of the consumer basket, food in some areas due to the disruption in trade and prices remain the main driver of headline inflation transport, the headline inflation rates (y-o-y) in (Figure 1.8). The 15.6 percent (September, y-o-y) rise March (8.5 percent) and April (8.0 percent) were not in food prices in rural areas, where the majority of the that different from that of the immediately preceding poor live, substantially exceeded the 9.7 percent rise months. Inflation has exceeded the upper bound of in urban areas (Figure 1.8). Pressures on food prices the central bank’s target range since February 2020 started easing in the fourth quarter as vegetables (Figure 1.7). Headline inflation reached 8.9 percent prices declined substantially thanks to the good for the year ending September 2020, driven by rising harvest in the agricultural Season B. This also affected food prices since late 2019 (10.9 percent y-o-y by headline inflation, which dropped to 4.2 percent in November, its lowest level since October 2019. Figure 1.7: Headline inflation drivers, 2019-20 (percentage points) Core inflation also rose in the second quarter 10 (Figure 1.7). Core inflation, which excludes fresh 8 products and energy items, rose to 8.1 percent y-o-y 6 in May 2020, a level not seen since December 2011. 4 This rise was on account of a 45 percent increase 2 in the price of a bus ticket when the lockdown was 0 eased (the number of bus passengers was limited to -2 only 50 percent of the normal capacity). In October, Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 buses were allowed to carry passengers to their Food (27%) Transport (12%) Alcoholic beverages & tobacco (≈5%) Housing, water, electricity, gas (21%) Target, upper bound Other items Core in ation Headline in ation full capacity and prices were reduced; thus, the Source: NISR core inflation gradually retreated to 3.7 percent in Note: (.) indicates the weight in the consumer basket November 2020. Figure 1.8: Food prices increased to a 10-year high in the first half of 2020 (percentage points) Urban areas Rural areas 40 -40 30 -30 20 -20 10 -10 0 0 -10 -10 -20 -20 Jan-19 Mar-19May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20May-20 Jul-20 Sep-20 Nov-20 Jan-19 Mar-19May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20May-20 Jul-20 Sep-20 Nov-20 Bread & cereals Vegetables Meat & sh Others Food in ation Bread & cereals Vegetables Meat & sh Others Food in ation Source: NISR 9 While mobility restrictions were eased in May 2020, the number of bus passengers was limited to 50 percent of the normal capacity, leading to a 45 percent increase in the price of a ticket. Rwanda Economic Update • Edition No. 16 7 Recent Economic Developments Monetary authorities responded to COVID-19, thereby cut since April 2019. This reduction is less than that cushioning the financial sector undertaken by some regional countries (Table 1.2), The National Bank of Rwanda (NBR) eased although interest rates in Rwanda are lower than in monetary policy in response to the crisis. The these other countries. reserve requirement ratio was reduced to 4 percent effective in April 2020 (the ratio had been held at 5 The banking sector has been cautious in extending percent since March 2009). The NBR also introduced new loans, despite entering the COVID-19 crisis in a Rwf 50 billion (0.5 percent of GDP) extended sound condition. Before COVID-19, nonperforming lending facility for banks (ELFB) to support banks loans (NPLs) were on a downward trend (Figure 1.9). facing liquidity shortfalls due to COVID-19 for the The capital to risk-weighted assets ratio remained period of April to October 2020. By end-September, well above the 15 percent minimum. However, two banks had accessed the ELFB for a total amount the significant deceleration of economic activities of Rwf 5 billion. The NBR also reduced the waiting exerted some pressure on the financial sector, with period for the treasury bonds rediscounting window rising NPLs and a declining ratio of capital to risk- from 30 days to 15 days. Overall, this had the effect of weighted assets since March 2020, affecting the increasing banks’ excess reserves with the NBR. Banks extension of new loans. As of October 2020, newly were allowed to restructure outstanding loans of approved loans were 9.2 percent lower than in the borrowers facing temporary cash flow challenges on same period in 2019. Nevertheless, credit growth an exceptional basis (from March 16 to April 10, banks stood at 18.6 percent, year-on-year, by October received requests to restructure loans amounting to 2020, reflecting the restructuring of about 39 25.5 percent of their total loan portfolio). The CBR percent of banks’ loan portfolio. The central bank has policy rate was reduced to 4.5 percent at end-April, encouraged the banking sector to restructure loans despite rising inflation, making a 100 basis points for cash-strapped borrowers due to the pandemic. Table 1.2: Monetary measures in response to the pandemic, selected countries Country Measures Burundi None Policy rate reduced by 150 basis points to 7.5%, mandatory reserve requirements eliminated, collateralized Congo, Dem. Rep. long-term facility for commercial banks established Ethiopia Provision of liquidity to commercial banks (0.45% of GDP) and for Commercial Bank of Ethiopia (0.5% of GDP) Kenya Policy rate lowered by 125 basis points to 7.0% Interest rate on Central Bank of Nigeria intervention reduced from 9 to 5 percent, liquidity injection to banking Nigeria system of 2.4% of GDP and additional 0.7% of GDP in liquidity provided for agricultural sector Policy rate reduced 50 basis points to 4.5%, extended lending facility (0.5% of GDP), Treasury bond purchases, Rwanda reserve requirement lowered 100 basis points Policy rate reduced by 250 basis points to 3.75% in three steps. Repo arrangements increased and interest South Africa rate on repos reduced. Size of weekly refinancing operations increased. Bank capitalization requirements eased and guidance on loan forgiveness by banks issued Discount rate reduced 200 basis points to 5%, collateral haircut requirements on government securities Tanzania reduced, and reserve requirement reduced 100 basis points to 6%. Will provide regulatory flexibility for loan restructurings. Limits on daily transactions and balances increased for mobile money operators Uganda Central bank rate reduced 200 basis points to 7%, liquidity injections and regulatory forbearance measures Source: IMF (2020b) 8 Rwanda Economic Update • Edition No. 16 Recent Economic Developments Figure 1.9: Rwanda’s banking system remains sound The current account deficit fell with the onset of (percent) the pandemic 26 8 Non-performing loans ratio (RHS) Rwanda’s current account deficit (CAD) eased in the second and third quarters, as the drop in 24 6 imports exceeded that of exports. The current account deficit fell to 12.7 and 10.4 percent of GDP 22 4 Capital adequacy ratio (MIN 12.5%) respectively in the second and third quarters of 2020, 20 2 from 16.1 percent of GDP in the first quarter of 2020 (Table 1.3). The narrowing of the CAD was largely 18 0 driven by an improvement in the deficits on goods Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 2018 2019 2020 and services and primary income, combined with a substantial increase in secondary income, reflecting Source: NBR grants from development partners to respond to the Some interest rates have been trending COVID-19 crisis. In Q2 and Q3 of 2020, the balance on downward, in line with the cuts in the central secondary income reached 6.3 percent of GDP. bank rate (CBR). Bank lending rates averaged 16.3 percent during the first three quarters of 2020, 20 Merchandise exports declined in the first three basis points lower than in the same period of the quarters of 2020 with the pandemic-driven previous year, while deposit rates have been stable disruptions in transportation and the decline at around 7.6 percent since 2018 (Figure 1.10). The in global demand. Merchandise exports in dollar interest rate on government’s domestic borrowing terms fell by 25.4 percent relative to the first three showed a mixed picture. While average interest rates quarters of 2019. All major commodity exports, on government borrowing on longer maturities except for tea, fell significantly in the second quarter. declined, there was an upward trend in rates on Nontraditional exports, which had emerged as the shorter maturities. main source of export earnings over the previous three years, fell to 54 percent of the first three Figure 1.10: Trends in interest rates, 2018-2020 (percent, 2020 average as of Sept.) quarters of 2019 level, due to land-border closures. 20 Non-monetary gold exports rose substantially 17.0 16.5 16.3 following the establishment of Aldango Ltd, an 15 Emirati gold refinery company in Rwanda in 2019. According to external statistics, non-monetary gold 10 8.0 7.8 exports amount to US$522 million in the first nine 7.5 7.6 7.6 7.2 6.8 7.2 6.4 6.7 5.1 5.2 5.6 5.5 5.5 months of 2020, following about US$173 million 5 exported in 2019. An easing of trade disruptions and lockdown restrictions increased goods exports 0 Bank Bank 1-month 3-month 6-month 12-month Deposit Lending T-bills T-bills T-bills T-bills in the third quarter by more than a third compared rate rate 2018 2019 2020 to the previous quarter in dollar terms, but they Source: NBR data remained 10 percent below their level of the third quarter of 2019. Rwanda Economic Update • Edition No. 16 9 Recent Economic Developments Table 1.3: Balance of payments (percent of GDP) 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 Current account -11.3 -13.6 -13.1 -10.4 -16.1 -12.7 -10.4 Goods and services -13.8 -14.5 -15.2 -14.1 -18.4 -16.8 -16.6 Exports 19.8 19.5 23.9 23.5 19.2 14.6 24.0 Goods 10.5 10.9 12.7 13.3 12.2 11.3 18.7 Services 9.3 8.6 11.2 10.2 7.0 3.3 5.4 Imports 33.6 34.0 39.1 37.6 37.6 31.4 40.6 Goods 23.0 25.4 27.9 28.0 29.2 27.7 35.3 Services 10.6 8.7 11.2 9.5 8.4 3.8 5.3 Primary income -3.8 -3.4 -3.4 -2.8 -3.1 -2.1 -0.2 Secondary income 6.3 4.3 5.5 6.5 5.4 6.3 6.3 o/w General government, net 3.0 1.5 2.7 3.3 2.4 3.4 3.0 Remittances, net 2.1 2.0 1.9 2.1 2.1 2.0 2.3 Capital account balance 2.5 2.3 2.7 2.6 2.7 3.5 2.7 Financial account balance 8.2 11.6 5.2 14.3 9.8 23.7 7.9 Direct investment 3.6 3.8 3.6 3.7 3.7 2.7 -1.1 Portfolio investment 0.0 -0.2 -0.6 -0.5 1.3 0.0 0.0 Loans and other investment 4.6 7.9 2.2 11.1 4.8 21.0 8.9 o/w General government, net 3.1 5.6 3.7 11.5 3.3 18.9 10.2 Net errors and omissions -2.1 -0.7 2.1 3.5 1.6 -2.2 6.2 Overall Balance -2.7 -0.4 -3.1 10.0 -2.0 12.3 6.4 Source: NBR Annual Reports, 2019/20 Services exports plunged in the second quarter to 2019. On the other hand, the travel services with the sudden stop in global travel.10 Rwanda balance also declined by US$83 million, compared to suspended international passenger flights starting 2019, for the first deficit in travel services since 2018. on March 20, 2020 after the first case of COVID-19 As travel and transport services represent about 65 was diagnosed on March 14, 2020 in Rwanda. This percent of total services exports, the overall services ban reduced exports of services, especially related deficit widened substantially. to tourism, i.e. travel, and to transport services. Accordingly, travel and transport exports fell by Goods imports contracted sharply in Q2-2020, for 73.2 percent and 41.7 percent in the first three the first time in eleven quarters. As investment quarters of 2020, respectively, compared to the same cooled and global value chains were disrupted, period of 2019. This had a two-fold impact on the goods imports dropped by 24.7 percent, y-o-y, in services trade deficit. On one hand, the deficit in Q2-2020, compared to the same period in 2019 transportation declined by US$32.6 million relative (Figure 1.11). The fall in capital goods (42.4 percent) and intermediary goods (24.7 percent) accounted for about 90 percent of the fall in the Q2 imports Data on services trade, as well as other balance of payments categories, 10 for the third quarter are not yet available. bill. By contrast, imports of consumer goods were 10 Rwanda Economic Update • Edition No. 16 Recent Economic Developments Figure 1.11: Imports contracted more than exports in the first half Figure 1.12: Official gross reserves, 2017–20 of the year (million, US$) (growth y-o-y in percent) 80 2,000 1,780.4 60 1,800 1,663.0 40 1,600 1,440.4 20 1,400 1,319.1 1,253.1 -6.9 1,165.6 0 1,200 1,137.0 -20 1,000 -24.7 800 -40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2018 2019 2020 600 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Sep-20 Exports growth Imports growth Source: NBR data Source: NBR data down by only 5.5 percent, reflecting the decline in Fiscal policy came under pressure due to the private consumption. Imports of energy products COVID-19 pandemic also fell by 13 percent, due to lower international oil The pandemic and resulting activities disruptions prices as imported quantities increased. An easing of severely impeded domestic revenue mobilization. trade disruptions and the lockdown also increased The government revised the budget following the goods imports in the third quarter by 47.7 percent COVID-19 outbreak to take into account lower- compared to Q3-2019. than-expected revenues.11 Provisional data for Q2- 2020 show that tax revenues fell by 12.6 percent in The increase in capital and financial inflows, real terms compared to the second quarter of 2019 especially central government borrowing, financed (Figure 1.13). Indirect taxes (on goods, services and the CAD and increased reserves. Capital inflows rose in the first three quarters, despite the decline in Figure 1.13: Tax revenue and expenditures fell in Q2-2020, but grants and net lending rose direct investment, due to financial assistance in the (percent change from Q2 2019 in real terms) form of concessional loans. Given the low level of 200 economic activity, a portion of these funds ended up 150 increasing reserves, which reached US$1780 million in September (Figure 1.12), equivalent to about 6 100 months of import cover. The comfortable level of reserves, together with the low demand for imports, 50 has helped the nominal exchange rate to remain 0 relatively stable. In the first half of 2020, the franc depreciated by 4.3 percent, y-o-y, in nominal terms -50 Tax Grants Current Capital Net against the US dollar, compared to a depreciation of revenue expenditure expenditure lending Source: Based on MINECOFIN 4.4 percent in the same period of 2019. The reopening Note: Overall urban price index used to calculate values in real terms of activities led to increased import demand in the second half, resulting in a further nominal exchange 11 The COVID 2019/2020 budget revision took place in early April 2020, rate depreciation (between June 30 and December 1, and was presented to the parliament as part of the budget paper framework. Beside revenue adjustments, Overall expenditures were 2020, the franc depreciated by 3.6 percent, compared also raised, by an additional 2.6 percentage points, to 34.2 percent of GDP, as there were mounting pressures for health spending to contain to 2.7 percent in the same period in 2019). and mitigate the coronavirus spread. Rwanda Economic Update • Edition No. 16 11 Recent Economic Developments international trade) fell by more than a quarter Provisional data of FY2019/20 (from July 2019 in real terms from the level in Q2-2019, although to June 2020) show a strong increase in current direct taxes increased slightly in real terms due to spending and net lending in response to the higher profit taxes resulting from the economic pandemic. Total spending is estimated to have performance in 2019. However, grants, which make jumped 2.4 percentage points of GDP in FY2019/20 up a small share of revenues, were double the level compared to FY2018/19, to 32.4 percent of GDP. The of Q2-2019, or a rise of 83 percent in real terms. government has increased spending on health and Table 1.4: Rwanda’s Public Finances, 2015/16 to 2019/20 Prov. Actuals FY2017/18 FY2018/19 Pre-COVID Pre-COVID Prov. revision revision Actuals Revenue and grants 22.7 23.7 23.5 21.9 23.3 Total revenue 18.2 19.2 19.3 17.4 18.7 Tax revenue 15.6 16.3 16.5 14.8 16.2 Direct taxes 6.7 7.1 7.3 6.5 7.3 Taxes on goods & services 7.7 7.9 8.0 7.2 7.7 Taxes on international trade 1.2 1.3 1.3 1.1 1.3 Non-tax revenue 2.6 2.9 2.8 2.5 2.5 Total Grants 4.5 4.5 4.2 4.5 4.7 Budgetary grants 2.4 1.9 1.5 1.8 1.9 Capital grants 2.1 2.7 2.7 2.7 2.8 Total expenditure & net lending 27.3 30.0 31.7 34.2 32.4 Current expenditure 14.7 15.4 15.5 16.4 16.0 Wages and salaries 4.0 4.2 4.4 4.5 4.3 Purchases of goods & services 2.7 2.6 2.8 3.5 2.7 Interest payments 1.1 1.2 1.6 1.6 1.5 Transfers 4.5 4.7 4.3 4.5 5.1 Exceptional social expenditure 2.3 2.7 2.4 2.4 2.4 Capital expenditure 10.6 12.3 12.8 13.6 12.7 Domestic 5.8 7.2 7.3 7.9 6.9 Foreign 4.8 5.1 5.5 5.8 5.8 Net lending 2.0 2.2 3.4 4.2 3.7 Change in arrears (net reduction-) -0.3 0.6 -0.6 -0.6 -0.3 Overall Deficit (cash basis) -4.9 -5.6 -8.8 -12.9 -9.4 Financing 4.9 5.6 8.8 12.9 9.4 Foreign financing (net) 4.4 5.1 6.7 12.0 10.2 Domestic financing 0.5 0.6 2.1 0.9 -0.8 Source: MINECOFIN & NISR 12 Rwanda Economic Update • Edition No. 16 Recent Economic Developments social safety sectors to contain the pandemic. It also cash basis, is estimated to have reached 9.4 percent implemented fiscal and monetary measures in the of GDP in FY2019/20 (from July 2019 to June 2020), fourth quarter of FY2019/20 (i.e. April–June 2020) up from 5.6 percent of GDP in FY2018/19 (Figure to provide immediate relief to affected individuals 1.14). The primary deficit—the overall fiscal balance and businesses as part of its Economic Recovery excluding interest expense—widened to 7.6 percent Plan in FY2019/20 (see Box 3.1 in Chapter III). Current of GDP. spending rose to 16.0 percent of GDP from 15.4 percent of GDP the FY before. This included about The government continued to rely mainly on 0.5 percent of GDP increase in outlays for higher foreign resources to finance the fiscal deficit. transfers for recurrent spending to health-related Foreign financing, much of its concessional financing institutions. Net lending equaled 3.7 percent of from development partners to support the ERP,12 GDP in FY2019/20, 1.5 percentage points of GDP equaled 10.2 percent of GDP in FY 2019/20, higher higher than in the previous fiscal year, mainly due to than the level of fiscal deficit. As a result, net domestic additional support to Rwandair following the loss of financing was a negative 0.8 percent of GDP (Figure revenues from transport of passengers. According 1.14). These dynamics in deficit financing are to the FY2019/20 budget execution report, COVID- expected to have led to at least a 6 percent of GDP related expenditures amounted to about Rwf109.1 increase in public debt. billion (about 1.2 percent of GDP). Capital expenditure reached 12.7 percent of GDP, which was lower than 1.4. Medium- to Long-Term Impact of COVID-19 both the pre-COVID and COVID-19 budget revisions A world of uncertainty: COVID-19 pandemic scenarios following the lockdown that disrupted all economic There is much uncertainty on the future of and social activities. The GDP share was, however, economic activity in the post-COVID-19 years. higher (0.4 percentage points more in FY2019/20 Most of the effects of the pandemic, notably than in FY2018/19). demand shocks, will be temporary and vanish in the long term. However, depending on the severity The combined effects of declining domestic and the length of the crisis, it is likely to have revenue mobilization and increasing expenditures some lasting impacts on capital accumulation and in the second quarter of 2020 widened the fiscal productivity, due to a deterioration in the health deficit for FY2019/20 as a whole to a level never and education systems (as it is difficult to replace seen before in Rwanda. The overall fiscal deficit, on health professionals and teachers who become ill Figure 1.14: Fiscal deficit widened sharply in FY2019/20 or die, or to reverse severe learning loses), in the (percent of GDP) level of human capital more generally (see Huber, -12 12 -10 10 -9.4 -8 8 12 As part of its support to Rwanda’s anti-crisis resource mobilization, the World Bank approved a US$14.25 million COVID-19 Emergency Fiscal de cit -6 -5.6 6 Response Project. The Bank also prepared and delivered a US$100- Financing -5.1 -4.8 -4.9 million supplemental DPO based on the series of Rwanda Energy -4 -4.1 4 -3.4 DPOs, while the Human Capital for Inclusive Growth DPO (US$150 million) to be delivered in FY21 also includes specific measures to -2 2 accelerate recovery from the COVID-19 pandemic. The IMF delivered two Rapid Credit Facilities totaling US$206.6 million. Other multilateral 0 0 and bilateral development partners providing additional financial support to Rwanda as of June 2020 include the African Development 2 -2 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Bank, UK and France. Rwanda did not request debt service suspension from official bilateral creditors as envisaged under the Debt Service Foreign nancing Domestic nancing Primary de cit Overall de cit Suspension Initiative (DSSI) endorsed by G20 Finance Ministers and Source: MINECOFIN data the Paris Club. Rwanda Economic Update • Edition No. 16 13 Recent Economic Developments Finelli, and Stevens 2018) and in infrastructure. Scenario 2: Prolonged spread. This scenario is a Such effects were observed during similar crises, pessimistic case assuming the unavailability of a notably the 2014 Western Africa Ebola crisis.13 vaccine and the emergence of a second wave of the pandemic that would lead to a substantial increase A computable general equilibrium model in new cases in 2021, forcing another lockdown of (described in Annex II) is used to assess the the economy in 2021 in both Rwanda and advanced medium-to-long-term effects from 2021 to 2030, economies. The major channels of the crisis in considering three scenarios for the evolution of the 2021would be affected the same way as in the pandemic based on: 1) the effectiveness of policy second quarter 2020, the worst period of the crisis. responses in Rwanda, (2) the anticipated length of the crisis, (3) availability and roll out of vaccines, Scenario 3: Early vaccine. This scenario considers a and (4) the effectiveness of policy responses in more optimistic case where a vaccine is developed developed economies. All three scenarios assume and administered relatively early, so as to prevent that the disease will be controlled, and lockdowns new cases in 2021 in both Rwanda and developed lifted completely in Rwanda and elsewhere, from nations. This scenario also assumes that the lockdown 2022 on. Assumptions underlying each scenario are is completely lifted. The economic effects of the (see Table 1.5): COVID-19 pandemic fade by early to mid-2021, as the daily number of infections stabilizes in the first half of Scenario 1: Baseline. This scenario assumes the 2021 in most countries. This improvement is driven status quo in 2021, meaning the continuation of by a combination of voluntary social distancing, the current situation characterized by an effective widespread pandemic-control policies, and the response of the government of Rwanda, localized availability of vaccines and additional therapeutic lockdowns, open borders for trade and tourism, the treatments, especially in advanced economies absence of a vaccine, and continued crisis in other where the COVID-19 pandemic continues to play out countries. The major channels of the crisis (labor, seriously. Major channels of the crisis in 2021 would capital, investments, oil price, other commodity be affected as during the first quarter 2020, when the prices, trade costs, tourism) in 2021 continue to be crisis only moderately affected the economy. affected the same way as in the second half of 2020. Table 1.5: Scenario Assumptions: COVID-19 heath and economic scenarios for 2021 Scenario 1: Scenario 2: Scenario 3: Key variables baseline prolonged spread early vaccine Health: Number of cases Low Moderate/High No new cases in 2021 Availability vaccines Non available Non available Vaccine available Economic: Domestic lockdown Localized lockdown Complete lockdown No lockdown Restriction on visitors Restriction on tourists Border closure for tourists No border closure for tourists Restriction on goods and services No restriction No restriction No restriction Lockdown of advanced economies Localized lockdown Complete lockdown No lockdown Source: Author’s construction World Bank (2019) finds that in Guinea, labor productivity starts 13 recovering after the Ebola crisis; however, in Liberia, labor productivity worsens after the crisis, and in Sierra Leone, it improves but is still significantly below the long-term average. 14 Rwanda Economic Update • Edition No. 16 Recent Economic Developments The adverse impact of the COVID-19 crisis is expected time to regain confidence in travel and hospitality to last in the long term services. However, these potential adverse effects The adverse effect of the COVID-19 outbreak on would be attenuated by effective implementation the GDP is expected to remain substantial in the of government’s planned large-scale infrastructure long term. Despite a rebound expected in 2021, in projects, as outlined in the Budget Framework Paper the absence of robust government interventions, (BFP) for 2020/21–2022/23, together with the ERP. the size of the economy would be, under the baseline scenario, 12 percent lower than in the no- Regardless of the scenario, the fiscal deficit is likely COVID scenario in 2021 and 19 percent lower in to increase in absolute terms and in percentage of 2025 (Figure 1.15). This would correspond to a GDP GDP (Figure 1.17). The extent of the damage already growth rate of 4 percent in 2021, significantly lower endured, and the scope of interventions planned for than the 7.4 percent pre-COVID projection.14 In the recovery mean that the deficit is likely to continue pessimistic scenario, where it is assumed that the to deteriorate regardless of the pandemic trajectory crisis lasts longer with a prolonged lockdown, GDP going forward.15 Under our baseline scenario, could be 13.3 percent lower than in the no-COVID government revenue would be 15.1 percent lower scenario in 2021 and 23.2 percent lower in 2025. in 2025. That would lead to a 27.0 percent increase In the absence of interventions, sectoral output in the overall deficit in 2025, compared with the under all three scenarios would be lower than in no-COVID-19 scenario (Figure 1.17). The result the no-COVID scenario through 2025: services implies that in the event of a quicker than expected suffer the largest decline in production, followed by recovery, strong policy measures would be needed manufacturing and agriculture (Figure 1.16). Services to contain the expansion of the fiscal deficit as soon growth is expected to remain far below its historical as possible. potential, as consumers and investors will require Figure 1.15: GDP Effect in the medium-to-long-term Figure 1.16: Sectoral effect in the medium-to-long-term (% deviation from no-COVID scenario) (% deviation from no-COVID scenario) -5.4 -10.8 -10.3 -12.0 -13.3 -15.4 -15.6 -14.1 -16.1 -19.0 -21.9 -19.7 -20.4 -23.0 -24.5 -24.4 -30.2 -28.4 2021 2025 2030 2021 2025 2030 2021 2025 2030 2021 2025 2030 Baseline Baseline Early Vaccine Prolonged Spread Agriculture Manufacturing Services Source: CGE Simulation results Source: CGE Simulation results 15 The 2020/21–2022/23 BFP envisions increased expenditures to contain the pandemic and to strengthen the health system, to 14 The government of Rwanda is projecting a 6 percent growth for 2021, support vulnerable households (including through ramping up food taking into account the effect of the crisis but also different policy distribution), to strengthen the education sector, and to support the interventions that are not captured in our simulations in this section. private sector through the ERF. As a result, the government expects the The following chapter on response will incorporate simulations of fiscal deficit to expand to 8.6 percent of GDP in 2020 and remain above some of the government interventions. 7.0 percent of GDP over the next two years. Rwanda Economic Update • Edition No. 16 15 Recent Economic Developments Figure 1.17: Fiscal effect in the medium-to-long-term Figure 1.18: Decomposition of Rwanda’s Public Debt, 2007–19 (percent deviation from no-COVID scenario) (percent of GDP) 120 31.7 27.0 HIPC 100 20.5 Eurobond 80 issuance 60 40 -8.0 20 -15.1 -17.5 0 2021 2025 2030 Baseline Public de cit Revenue Domestic debt External debt Public & publicly guaranteed debt Source: CGE Simulation results Source: MINECOFIN, IMF, World Bank Note: HIPC = Highly Indebted Poor Countries Initiative The COVID-19 crisis has exacerbated challenges Reliance on concessional financing will help keep to debt sustainability in Rwanda. Rwanda’s rapid Rwanda’s debt moderately sustainable even as growth has relied heavily on public investment, a it rises. More than 80 percent of Rwanda’s public major driver of the substantial fiscal deficits over and publicly guaranteed debt is external, including the past few years.16 Rwanda’s public debt has risen commercial loans and Eurobonds. Rwanda has also steadily since 2013 (Figure 1.18) and amounted provided guarantees for state-owned enterprises in to 58.1 percent of GDP at end 2019 (that is, before strategic sectors, amounting to about 6 percent of the pandemic). As a result of the pandemic- GDP, as of end-2019. The Government does not intend driven deterioration in output and export growth, to use central bank financing directly or indirectly accompanied by increased borrowing needs, public to cover its financing requirements, which reduces debt is now forecast to reach nearly 66 percent of the risk to macroeconomic stability arising from GDP in 2020, or about 6 percentage points higher the fiscal expansion and the COVID-19 pandemic. than anticipated in REU-15. Accordingly, the IMF and Despite its clear strengths in macroeconomic and World Bank revised the risk rating of debt distress debt management, Rwanda is now confronted from “low” to “moderate” in the June 2020 Debt by the difficulty of financing its ambitious public Sustainability Analysis. investment objectives, which highlights the limits of the public-sector-led model to deliver sustained growth over the long-term. 16 In the new investment push, through the implementation of the seven-year Government Plan, more than 40 percent of the government budget was expected to be devoted to capital spending and net lending. 16 Rwanda Economic Update • Edition No. 16 PART TWO SOCIAL AND HUMAN CAPITAL IMPACT OF THE CRISIS Rwanda Economic Update • Edition No. 16 17 Social and Human Capital Impact of The Crisis 2.1. Introduction potential and growth in productivity over the long The severe impact of the pandemic on economic term. The closure of schools also increased an already activity discussed in Chapter 1 has had dire existing problem of early and unwanted pregnancies implications for poverty and welfare. Lower that negatively affect young girls’ lives countrywide. earnings and higher prices depressed household incomes in 2020. In the absence of a strong response 2.2. Impact on Poverty and Inequality by government, the crisis would increase the share of The impact of the COVID-19 crisis on Rwandan the population that is poor by almost 5.1 percentage households is likely to be as dramatic as for the points in 2021, and the decline in household welfare economy as a whole (Figure 2.1). Household (relative to a no-COVID scenario) would rise over welfare in the baseline scenario in 2020 is 9.3 the next decade17. The government’s rapid response percent below the level of the no-COVID scenario, to the pandemic has succeeded in keeping the as household incomes fall by 6.3 percent (reflecting population share of new infections and of deaths losses of employment as well as trade opportunities well below that of most other countries. However, in Rwanda and declines in earnings through the the incidence of the disease is unequally distributed: lockdown period) and consumption prices rise by two-thirds of infections are in Kigali, and both men 2.9 percent due to transaction costs generated by and working age groups (men and women) account the pandemic-related restrictions.18 for 65 percent of cases. Lockdown policies and fear of infection have disrupted critical health services, The fall in household welfare affects both rural and particularly childhood immunization and nutrition urban areas. However, rural households experience services, which runs the risk of exacerbating lower losses in welfare, as the agriculture sector is stunting and may over time impair productivity. less affected than are services and manufacturing. Nevertheless, a modeling exercise shows that if Consumption in 2020 is lower than in the no-COVID services had been disrupted to a comparable extent scenario by 7.2 percent and 9.4 percent for rural and as in other pandemics, the expected rise in child and urban households, respectively (Figure 2.2). This maternal mortality next year would have been much Figure 2.1: Aggregate household income and consumption in 2020 worse. The closure of schools affected around 3.5 (percent deviation from no-COVID) million children. Estimates based on interruptions 4.0 in schooling in other countries and HCI 2020 data 2.9 2.0 suggest that expected years of schooling may 0.0 decline between 0.3 to 0.7 years, from a baseline -2.0 of 6.9 years, which could result in approximately 3 -4.0 percent lower incomes over the children’s lifetimes. -6.0 There is a risk that many children, particularly -6.3 -8.0 adolescent girls and children from poor households, will not return to school, reducing their earnings -10.0 -9.3 CPI Household consumption Household expenditure income To develop the poverty estimates, the team used the EICV5 data, and 17 Source: CGE Simulation results consumption aggregates were updated to 2020 (pre-pandemic) based on growth between 2016 and 2020. Then the shocks to household consumption due to the pandemic (as outlined in chapter 2) were applied to various segments of the population to obtain the increase in poverty due to the COVID-19 shock. Annex VI provides further details on how the poverty estimates and social protection responses were simulated. Household welfare is measured by real consumption. 18 18 Rwanda Economic Update • Edition No. 16 Social and Human Capital Impact of The Crisis Figure 2.2: Aggregate household welfare loss in 2020 skilled workers and civil servants. The welfare loss (percent deviation from no-COVID) compared to the no-COVID scenario is higher among 0 the poorest urban and rural non-farm households -2 (Figure 2.3).19 The result for urban workers reflects the -4 better protection during the crisis afforded the jobs -6 of urban skilled workers, workers in the formal private sector, and civil servants. This is consistent with the -8 -8.3 -8.3 25 percent decline in employment from February -10 -9.7 to May 2020 for workers without formal education, -10.9 -12 compared to the 10 percent fall for urban workers on Rural farm Rural non-farm Rural Urban average, reported in the household survey. This result Prolonged spread also is consistent with the substantial declines in Source: CGE Simulation results key services, such as transportation, and hospitality, finding is consistent with the larger decline in the construction, and commerce, that are intensive in employment to population ratio among workers unskilled labor. in urban areas (nearly 10 percentage points, vs 4 percentage points in rural areas). Within the rural The pandemic is generating long-lasting inequalities area, the rural non-farm sector is more affected In the absence of any response to the pandemic than the rural farm sector (Figure 2.2), reflecting the by government, the decline in household welfare stronger linkages between non-farm and the urban (relative to the no-COVID scenario) would rise over area as well as greater vulnerability to the high food time (Figure 2.4). Under the baseline scenario, the price increases in the rural area. welfare losses would rise from around 11 percent lower than the no-COVID-19 scenario in 2021 to 19 The effect of the COVID-19 is regressive within percent lower in 2025. This welfare gap would rise the urban area, reflecting the higher resilience of through 2030 even under the assumption of a quick Figure 2.3: Aggregate household consumption by income Figure 2.4: Welfare effect in the medium-to-long-term quintile in 2020 (percent deviation from no-COVID scenario) (percent deviation from no-COVID scenario) Rural farm Rural non-farm Rural Urban Status quo Optimistic Pessimistic 2021 2025 2030 2021 2025 2030 2021 2025 2030 quintile 1 quintile 2 quintile 3 quintile 4 quintile 5 quintile 1 quintile 2 quintile 3 quintile 4 quintile 5 quintile 1 quintile 2 quintile 3 quintile 4 quintile 5 quintile 1 quintile 2 quintile 3 quintile 4 quintile 5 -9.6 -10.7 -11.4 -11.7 -12.7 -13.9 -15.4 -15.8 -15.8 -16.1 -18.6 -19.9 -6.7 -6.7 -7.0 -6.7 -6.8 -21.7 -21.9 -7.2 -7.5 -7.1 -7.3 -23.2 -7.5 -24.4 -8.7 -9.2 -28.4 -9.7 -9.9 -9.8 -9.6 -10.4 -32.9 -12.0 -12.1 -12.4 Rural Urban Source: CGE Simulation results Source: CGE Simulation results 19 For the rural farm households, our findings suggest higher losses among the richest categories of household groups (Figure 2.3). However, a 6.7 percent reduction of the poorest quintile among the rural farm households would have more dramatic effects that a 7.5 percent consumption loss of the richest households. Rwanda Economic Update • Edition No. 16 19 Social and Human Capital Impact of The Crisis recovery (the optimistic scenario), although at a by government (the scenario assumes that there slower pace. This finding reflects not only the legacy is no government response to the crisis), both of the loss incurred by the direct shock in 2020 but agricultural production and food imports fall due also slower growth than in the no-COVID scenario to the combined impact of supply side shocks and over the next decade. increasing transaction costs for imports.20 Although the welfare losses in the rural area are The impact of the COVID-19 crisis on poverty lower than those in the urban area in the short has been dramatic. Our estimates show that, in term, rural households are more likely to remain the absence of any intervention, the crisis would trapped in poverty over the long term. The long- increase the share of the population that is poor by term adverse effect of the pandemic increases almost 5.1 percentage points in 2021, in the baseline disproportionally more among rural households and scenario (Figure 2.5). This represents potentially an the poorest households, accentuating inequality. additional 550,000 new people falling under the While the decline in rural household consumption poverty line in 2021. Although the poverty incidence (relative to the no-COVID scenario) is less than that increase in urban areas is greater than the incidence of urban households in 2020, under the baseline change in rural areas, the number of new poor scenario the fall in rural consumption in 2025 is higher households in rural areas is 3.2 times higher than the than in urban households (Figure 2.4). This finding number of new poor households in urban areas. This reflects the fact that urban activities (services and is because initially there are far more poor people industry) are likely to grow faster than agricultural in rural areas (more than 90 percent of total poor) activities in the post-COVID-19 area, mirroring the and many more vulnerable non-poor people in rural trend of recent 15 years in Rwanda. It also underlines areas live just over the poverty line. the vulnerability of affected households in rural areas, which warrants special attention. Poverty rises by even more under the pessimistic scenario. Recent developments, including the The COVID crisis has the potential to threaten continued GDP decline in Q3 of 2020, and the Rwanda’s food security. Without a strong response increasing COVID-19 spread resulting in a lockdown Figure 2.5: Poverty impact of COVID-19 Number of Poor due to COVID- 19 Change in poverty incidence due to COVID- 19 600,000 5.6 5.5 500,000 5.4 400,000 5.3 5.2 300,000 5.1 200,000 5.0 4.9 100,000 4.8 0 4.7 2021 2021 National Rural Urban National Rural Urban Source: Microsimulation estimates Food items considered include agricultural commodities and (semi) 20 processed food. Imports fall for both categories. Output of food crops does not decline, but that of the agro-industry declines. The supply side shock is due to lower imports and semi-processed or processed food production. 20 Rwanda Economic Update • Edition No. 16 Social and Human Capital Impact of The Crisis in Kigali in January 2021, may indicate that the followed by a flattening of the curve in September/ pessimistic scenario is playing out. Under this October and small surge in November (Figure 2.6). scenario, the overall increase in the poverty headcount Rwanda’s 458 cases per million is considerably below is 5.7 percentage points, indicating an estimated the average for East and Southern Africa (1826 per additional 625,500 people falling into poverty. million), and below rates in other well performing countries (Japan, South Korea) but not quite as low The impact of COVID-19 disproportionately affects as rates in some of the best performing countries, women in Rwanda. The employment to population such as New Zealand and Thailand (Figure 2.7). The ratio decreased by 5 percentage points from 48.3 to mortality rate (0.6 percent) is much lower than the 43 percent through the lockdown period, with larger average for East and Southern Africa (2.5 percent) decreases among female workers (6.2 percentage and considerably below mortality rates in the most points versus 4 percentage points among male affected countries (e.g. Mexico:10 percent; United workers). This is in part because (according to the Kingdom: 6 percent; Peru: 4 percent). The daily recent labor market survey) women are more likely to positivity rate (i.e. out of all tests conducted how be seasonal workers (44 percent versus 31 percent) many were positive) rose over the summer, but and more likely to be taking care of a sick relative (4 remains one of the lowest in Africa and considerably percent versus 1 percent). Annex I provides further below the 5 percent WHO recommendation to ease information on women employment trends. restrictions. Rwanda has conducted more tests per capita than many countries with considerably 2.3. Impact of the Crisis on Health higher positivity rates (experts agree that testing The health impact of COVID-19 has been severe, but should be scaled to the size of the outbreak),21 but less so than in most other countries testing per capita remains below levels in the best Rwanda has done well according to key metrics for performing countries (e.g., Thailand, South Korea, assessing the COVID-19 response. New infections Zambia--Figure 2.7). Rwanda’s success in managing have dropped sharply. With an easing of the initial the pandemic may be explained by a combination lock down policy, the country saw several small of factors including swift, early actions through surges in cases in June-July; a major spike in August, strict lockdown policies and mandatory mask use; Figure 2.6. Evolution of daily confirmed coronavirus cases Figure 2.7: Total cases per million population, November 30, 2020 (percent) 250 United States 40,910 Italy 26,489 200 United Kingdom 24,066 Iceland 15,801 South Africa 13,320 Canada 10,110 150 Finland 4,496 Bangladesh 2,823 Indonesia 1,970 100 Ghana 1,663 Kenya 1,555 Japan 1,178 50 Australia 1,095 Senegal 961 Zambia 960 Cote d'Ivoire 809 0 South Korea 676 Rwanda 458 14-Mar-20 23-Mar-20 1-Apr-20 10-Apr-20 19-Apr-20 28-Apr-20 7-May-20 16-May-20 25-May-20 3-Jun-20 12-Jun-20 21-Jun-20 30-Jun-20 9-Jul-20 18-Jul-20 27-Jul-20 5-Aug-20 14-Aug-20 23-Aug-20 1-Sep-20 10-Sep-20 19-Sep-20 28-Sep-20 7-Oct-20 16-Oct-20 25-Oct-20 3-Nov-20 12-Nov-20 21-Nov-20 30-Nov-20 New Zealand 427 Thailand 57 Actual data: new con rmed cases reported by day - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Smoothed cases: 7-day moving average Source: Rwanda Biomedical Center Source: Our World In Data (OWID) by the Global Change Data Lab (https://ourworldindata.org/coronavirustesting, visited on December 2, 2020) 21 A high rate of positive tests indicates a government is only testing the sickest patients who seek out medical attention and is not casting a wide enough net. Source: Johns Hopkins Coronavirus Resource Center. Rwanda Economic Update • Edition No. 16 21 Social and Human Capital Impact of The Crisis Figure 2.8: Daily positivity rate vs. daily number of tests per Figure 2.9: Total tests per thousand population, 1000 population, December 2, 2020 November 25, 2020 Iceland 613 United States 567 United Kingdom 540 Australia 385 Italy 347 Finland 345 Canada 294 New Zealand 258 South Africa 90 South Korea 57 Rwanda 47 Japan 24 Zambia 21 Ghana 19 Bangladesh 16 Senegal 14 Indonesia 13 Cote d'Ivoire 8 Thailand (No data) Kenya (No data) 0 50 100 150 200 250 300 350 400 450 500 550 600 650 Source: JHU Coronavirus Resource Center Source: Our World In Data (OWID) by the Global Change Data Lab (https://ourworldindata.org/coronavirustesting, visited on December 2, 2020) an effective national testing strategy; and consistent old) also account for 65 percent of confirmed cases messaging that was critical to maintaining public (Figure 2.11). This may be explained by the youthful confidence. age-structure; the nature of employment (e.g. construction, security, commercial activities) that The disease has been unequally distributed across increases exposure to the virus; and possibly by the the population. Kigali has 67 percent of total cases, prevalence of co-morbidities (e.g. cardiovascular and together with three districts in the Western diseases, hypertension, diabetes, obesity) which Province (Rusizi, Rubavu, Nyamasheke) and one occur at younger ages in developing countries district (Kirehe) in the Eastern Province accounts and are often uncontrolled/undiagnosed, placing for 92 percent of total cases (Annex III). Males individuals at greater risk of acquiring the virus and represent roughly 65 percent of total confirmed of higher disease severity.22 Other adversely affected cases (Figure 2.10). Working-age adults (20-39 years groups include prisoners and refugees. Figure 2.10: Infections, males versus females Figure 2.11: Infections by age (as of November 30, 2020) (as of November 30, 2020) 2,000 1,894 1,800 1,772 1,600 1,400 Number of cases Female,1,993, 1,200 34% 1,000 893 Male, 3,955, 800 739 66% 600 410 400 200 165 59 16 - < 20 20-29 30-39 40-49 50-59 60-69 70-79 80+ Age group Source: Rwanda Biomedical Center Source: Rwanda Biomedical Center 22 A global review of the literature found hypertension to be the most prevalent co-morbidity in COVID-19 populations globally. Bajgain et. al. (2020). 22 Rwanda Economic Update • Edition No. 16 Social and Human Capital Impact of The Crisis Box 2.1: Rwanda COVID-19 Updates as of January 17, 2021 Since the completion of the COVID-19 analysis for the Rwanda Economic Update, the trajectory of the pandemic has evolved rapidly with the country currently experiencing a second wave, and a rise in severe cases and total deaths, as seen in other parts of the continent and beyond. As of mid-January, Rwanda has a total of roughly 11,000 cases and about 140 fatalities with a Case Fatality Rate of 1.3 percent. As depicted in the figures below, while the curve had flattened by end November, there is now a resurgence in cases and deaths. The most affected areas/ districts are Kigali (Gasabo, Kicukiro and Nyarugenge districts) with 56 percent of all cases; followed by Musanze (8 percent) and Rubavu (8 percent) districts, and Huye (6 percent) and Muhanga (4 percent) districts. The bulk of cases come from local transmission with imported cases representing 7 percent of the total. The main clusters have occurred at local markets, banks, and schools. Transmission has also occurred among contacts of patients under home-based care and contacts of passengers arriving in Rwanda, as international and regional flights re-opened. Box table 2.1: Confirmed Cases of Covid-19: March 14, 2020 to Box table 2.2: COVID-19 Related Deaths: March 14, 2020 to January 17, 2021 January 17, 2021 8 160 300 12,000 7 140 250 10,000 6 120 200 8,000 5 100 150 6,000 4 80 3 60 100 4,000 2 40 50 2,000 1 20 - - 0 0 14-Mar-20 28-Mar-20 11-Apr-20 25-Apr-20 9-May-20 23-May-20 6-Jun-20 20-Jun-20 4-Jul-20 18-Jul-20 1-Aug-20 15-Aug-20 29-Aug-20 12-Sep-20 26-Sep-20 10-Oct-20 24-Oct-20 7-Nov-20 21-Nov-20 5-Dec-20 19-Dec-20 2-Jan-21 16-Jan-21 14-Mar-20 28-Mar-20 11-Apr-20 25-Apr-20 9-May-20 23-May-20 6-Jun-20 20-Jun-20 4-Jul-20 18-Jul-20 1-Aug-20 15-Aug-20 29-Aug-20 12-Sep-20 26-Sep-20 10-Oct-20 24-Oct-20 7-Nov-20 21-Nov-20 5-Dec-20 19-Dec-20 2-Jan-21 16-Jan-21 Number of new con rmed cases reported in the last 24 hours Number of new con rmed deaths reported in the last 24 hours Smoothed cases: 7-day moving average Cumulative number of con rmed cases (right axis) Total number of con rmed deaths (right axis) Source: RBC Source: RBC While Rwandese authorities are actively containing the most recent surge, efforts are also underway to better understand and address contributing factors. These include the possibility of more lethal and transmittable COVID-19 variants (as found in England and South Africa); insufficient monitoring and enforcement of patients on home-based care; and risks stemming from the gradual re-opening of the economy and public institutions. With testing remaining critical, Rwandese authorities are bolstering diagnostic capacity with 42 private health facilities recently accredited to provide SARS-CoV-2 Antigen Rapid Tests1/. Rapid testing has been also deployed at all public hospitals. Furthermore, an RT-PCR testing laboratory was established at the Kigali International Airport to reduce the turnaround time for getting results for incoming travelers. As of mid-January, Rwanda has performed a cumulative total of nearly 800,000 tests (i.e. roughly 62.6 tests per 1,000 population) with about 21% of these tests done during the past six weeks during the recent surge. Regarding COVID-19 case management, a new treatment center with 136 COVID-19 dedicated beds and a good quality oxygen supply was established at the Nyarugenge District Hospital and eight referral hospitals were strengthened to manage COVID-19 cases. Note: 1 / Population meeting national criteria for rapid test are, symptomatic cases, contacts of positive cases, healthcare workers, high risk populations in confirmed outbreaks, prisons, religious institutions, ports of entry, and non-COVID-19 in-patients. Rwanda Economic Update • Edition No. 16 23 Social and Human Capital Impact of The Crisis The pandemic has impaired health services, but these recovering in subsequent months (Annex III).25 Total disruptions have been largely transitory admissions dropped by up to 15 percent (April-May Disease outbreaks and pandemics can disrupt 2020) and referrals plummeted by 36 percent (April delivery of essential health services. This can occur 2020), although admissions and referrals recovered through the supply side, as resources are diverted to to expected levels by August 2020. Institutional cope with the immediate emergency, operating hours deliveries were lower than expected by 8-10 percent are adjusted and/or supply chains are disrupted. And (March-May 2020); declines since June 2020 are no it can occur through the demand side, as lockdown longer statistically significant but services remain policies hinder mobility, people avoid health facilities, lower than expected. There were declines in the or they may have a reduced ability to pay for care.23 number of road traffic incidents; simple malaria The COVID-19 pandemic has been no exception with cases; and diarrhea cases.26 There were no statistically massive disruptions globally in the delivery of critical significant declines in new registrants for antenatal services, such as childhood vaccination and control or postnatal care but there were slight declines of TB and non-communicable diseases (e.g. diabetes, in postnatal care during the pandemic. Analyses cancers), as well as huge risks of excess deaths from carried out by the Ministry of Health finds similar many treatable diseases.24 patterns with outpatient visits and newly initiated patients on antiretroviral therapy lagging behind Rwanda has also experienced disruptions in the levels in the previous year during the peak months delivery of essential health services, but these but with rates bouncing back by August 2020 appear to be transitory. Disruptions stem primarily (Figure 2.12 - Figure 2.13). from the stringent initial lockdown policies (March- May 2020) which hindered people’s ability to seek The immunization program and other child services care and added to the cost and difficulty of using appear to have been disrupted, with children public transport that was directed to carry fewer missing key appointments. The number of children passengers; and from the postponement of elective vaccinated for BCG, Penta3 and Polio3 was lower interventions, and possibly other critical care, for fear than expected, with Penta3 and Polio3 experiencing of infection. Modelling work done by the World Bank an initial decline of 10 percent (May 2020) and controlling for seasonality and facility type finds additional drops of 10 percent (June 2020) and 4 that Rwanda experienced statistically significant percent (July 2020). The BCG vaccine, given at birth, disruptions during March-May 2020 (peak of the followed a similar pattern as institutional deliveries lockdown) with persistent effects on vaccination with declines during March-May 2020 (highest in and institutional deliveries, but with many services May at 15 percent) and lower than expected rates For example, during the 2014-15 Ebola outbreak average health care 23 utilization dropped by 18 percent with sharper drops in maternal and child services such as deliveries (28 percent decline). During the 2003 25 The analytical approach used a three-pronged approach using data SARS outbreak there was a 24 percent decline in outpatient services from the health management information system: (i) analysis of all which was largely attributable to people’s fears about contagiousness. health facilities with full panel data; (ii) direct comparison of April-June The Potential Impact of the COVID-19 Response on Tuberculosis in High- 24 2019-2020 service delivery levels on facilities with complete reporting; Burden Countries: A Modelling Analysis finds that globally, a 3-month and (iii) regression analysis to predict utilization rates for March-June lockdown and a protracted 10-month restoration could lead to an 2020 using observed data from January 2018-February 2020. additional 6.3 million cases of TB between 2020 and 2025, and an 26 Road traffic incidents fell by about 40 percent in April (though not additional 1.4 million TB deaths. Childhood vaccination was the most statistically significant); and diarrhea cases dropped by 44 percent in disrupted service among the countries studied in Global Financing April but reached previous levels in August, however the model did Facility. 2020a. not accurately predict changes in these indicators. 24 Rwanda Economic Update • Edition No. 16 Social and Human Capital Impact of The Crisis Figure 2.12: Outpatient health facility visits Figure 2.13: Patients newly initiated on Antiretroviral treatment (ART) 2,500,000 1,400 1,200 2,000,000 1,000 1,500,000 800 1,000,000 600 500,000 400 Feb Mar Apr May Jun Jul Aug Sep Feb Mar Apr May Jun Jul Aug 2019 2020 2019 2020 Source: Ministry of Health, Rwanda Source: Ministry of Health, Rwanda given previous trends. Kigali City, which has the provinces may have impeded the ability of health bulk of COVID-19 cases, has seen significant and personnel to travel to the Northern province, where persistent disruptions in the vaccination of children, a substantial number are deployed. most likely a result of both supply and demand side impediments. The Ministry of Health analysis finds Rwanda has been able to leverage its strong primary similar disruptions in service delivery for malaria health system and avert much larger disruptions and the treatment of diarrhea and pneumonia in and loss of lives. Modeling estimates done by the children under five. By contrast, while all provinces Global Financing Facility using the Lives Saved Tool experienced severe disruptions in the delivery of (LiST) model show that COVID-19-related disruptions Integrated Management of Childhood Illnesses could have left many more women and children (IMCI) services, by August 2020 services bounced without access to essential services and resulted in back to expected levels. higher maternal and child morbidity and mortality (Global Financing Facility, 2020b). If declines in Disruptions in service delivery were consistently service utilization similar to those observed in higher in the Northern and Western provinces. As other global epidemics would have occurred in seen in Annex III, institutional deliveries and maternal Rwanda, as many as 264,900 fewer children would postnatal care visits had recovered only partially by have received oral antibiotics for pneumonia August 2020. Trends in immunization coverage (Polio, and 459,900 fewer would have received DPT DTP, BCG) between March and August 2020 also vaccinations. There would also have been 93,300 show persistently high levels of disruption. Several fewer facility-based deliveries, and 390,600 fewer factors may explain the higher levels of disruption, women would have had access to family planning including intermittent selective lockdowns in the services. If the coverage of all essential maternal Western province and restricted movements on and child health interventions in Rwanda would public transportation (Rusizi, Rubavu).27 Curfews and have declined in a similar way, the result would have restrictions on movements between Kigali and other been a 29 percent increase in child mortality and a 23 percent increase in maternal mortality over the 27 next year. Table 2.1 illustrates the persistent risks Government decisions to manage various surges in COVID-19 in the Western province, that has some of the highest number of cumulative cases associated with service delivery disruptions during (Rusizi: 594; Rubavu: 165; Nyamasheke: 151) are noteworthy, including protracted restrictive movements to and from Rusizi and Rubavu. disease outbreaks and pandemics. Rwanda Economic Update • Edition No. 16 25 Social and Human Capital Impact of The Crisis Table 2.1: Examples of the impact of disruptions on coverage of essential services Current Coverage if Fewer people coverage services disrupted receiving services Oral antibiotics for pneumonia in children 54 % 27 % 264,900 DPT vaccine* for children 89 % 43 % 459,900 Facility-based delivery 91 % 46 % 93,300 Contraceptive prevalence rate (CPR**) 57 % 35 % 390,600 * Diphtheria, pertussis (whooping cough), and tetanus vaccinations ** CPR includes both modern and traditional methods and is calculated for married women only Disruptions in child nutrition services can affect Due to the government’s success in minimizing future productivity disruptions to health and nutrition services, the To understand the potential impact of service impact of the reduction in nutrition services on disruptions on stunting outcomes, changes in stunting outcomes and future productivity loss the coverage of 7 key nutrition interventions for has been minimal. The economic and health service 3 scenarios during 2020 and 2021 are modeled disruptions result in 103 additional wasting related (Table 2.2): (i) In a baseline scenario, coverage of deaths in 2020 and 2021 under a baseline scenario nutrition services falls by 8.8 percent28 in 2020 and of limited disruptions and could be as great as recovers in 2021; (ii) In an optimistic scenario, service 310 additional deaths in a pessimistic scenario or coverage in 2020 doesn’t change and increases by 42 fewer deaths in an optimistic scenario (Table 10 percent in 2021; and (iii) In a pessimistic scenario, 2.3). If there were limited disruptions to nutrition service coverage declines by 16.4 percent29 in 2020 services under a baseline scenario, we estimate that and by 10 percent in 2021. In all scenarios, coverage an additional 1,373 children will be stunted in returns to levels in the no-COVID scenario in 2022. 2020 and 2021. A pessimistic scenario of greater Table 2.2 presents assumptions for differences in disruptions would result in an additional 4,695 GDP per capita growth and nutrition interventions stunted children in 2020 and 2021. If these between COVID and no-COVID scenarios in each year. disruptions were successfully mitigated and Table 2.2: Modeled changes in intervention service coverage and GDP per capita change Year 2020 2021 Scenario Pessimistic Status Quo Optimistic Pessimistic Status Quo Optimistic Change in GDP per capita1 10.0% 10.0% 10.0% 7.7% 6.1% 4.8% Nutrition interventions Breastfeeding promotion 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% Complementary feeding SBCC 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% (food secure populations) Complementary food supplementation 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% (food insecure populations) Vitamin A supplementation 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% Iron and folic acid in pregnancy 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% ORS for diarrhea treatment 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% Zinc for diarrhea treatment 16.4% 8.8% 0.0% 10.0% 0.0% 10.0% Source: WBG Staff estimates Note: 1/ Compared with no COVID scenario in same year 28 This is the reported decline in facility-based delivery at sampled health facilities during June 2020. This is the reported decline in IMCI services at selected health facilities 29 during June 2020. 26 Rwanda Economic Update • Edition No. 16 Social and Human Capital Impact of The Crisis Table 2.3: Modelled future productivity losses due to additional cases of stunting and nutrition-related child deaths due to the secondary effects of COVID-19, 2020-2021 Scenario Pessimistic Status Quo Optimistic Outcome Additional Productivity Additional Productivity Additional Productivity cases loss cases loss cases loss Stunting 4,695 US$12 million 1,373 US$3.5 million -739a -US$1.9 million Wasting-related deaths 310 US$4.25 million 103 US$1.1 million -42b -US$0.5 million Source: WBG staff estimates Notes: a/ Fewer cases, b/ Fewer deaths there were no changes in coverage of nutrition that they are too old to return to school.30 A phone services in 2020 and an increase in 2021, 739 survey indicated that 63 percent of teachers think fewer children would be stunted in 2020 and some students are likely to not return to school. 2021 in an optimistic scenario. The present value According to NISR, the share of employed students of future productivity losses from excess stunting in total employment increased from 3.4 percent in and wasting related mortality would be US$4.6 February 2020 to 8.8 percent in August 2020. million under the baseline scenario and as high as US$16.3 million under the pessimistic scenario. Adolescent girls, particularly those from poor Under an optimistic scenario in which there are no households, may be particularly at risk of exclusion. service disruptions in 2020 and a modest increase There is concern about an increase in teenage in coverage in 2021, there will be a gain of US$2.4 pregnancies, which rose from 5.7 percent of teenage million in economic productivity. girls in 2007/2008 to 7.2 percent in 2014/2015 (NISR, 2009; 2012; 2015). Approximately 45 percent of 2.4. Impact of the Crisis on Education head teachers pointed out that over-age students, The education sector swiftly put into place decisive adolescent girls and children whose households measures to contain the spread of the disease. By have suffered economic shocks are particularly March 21st, a full lockdown had been implemented vulnerable. and all schools were closed. An estimated 3.5 million students have been out of school since the pandemic Education markets are likely to be disrupted, began, and for many children and adolescents, no putting a further strain on the public sector. In lessons have been held in schools for most of the a June 2020 report, the UN estimated that about year. Rwanda isn’t alone in this regard: by mid-April 21,640 or 21.5 percent of educational staff (teachers 2020, 95 percent of countries had at least partially and non-teachers) were employed in private schools closed their schools (UNESCO 2020). and may be vulnerable if private schools are not able to stay afloat (Ndiaye, 2020). Private schools have School closings will increase dropouts and disrupt experienced a sharp drop in fee revenues during private educational institutions the closure period, and many may have relinquished The disruption of education is likely to reduce their rented premises or be at risk of defaulting on enrolment when schools reopen. Studies have their loan payments. Reduced incomes as a result repeatedly found that interruptions in education of the pandemic are likely to lower enrolment once lead to fewer children returning to school, as they private schools reopen. may have begun earning an income or they may feel See Carvalho et al. (2020) and Rohwerder (2020), UNDP (2015) and Smith 30 (2020) on Ebola, Meyers and Thomasson(2017) on a polio epidemic. Rwanda Economic Update • Edition No. 16 27 Social and Human Capital Impact of The Crisis School closures can have a long-term impact Estimates based on such historical precedents on learning and HCI 2020 data suggest that expected years of Studies find that the impact of school closures can schooling may decline between 0.3 to 0.7 years, be seen throughout life. School closures lead to from a baseline of 6.9 years (Table 2.4). Similarly, an increase in grade repetition and, in the long run, learning adjusted years of schooling may decline to lower educational attainment, including lower between 0.2 to 0.6 years, from a baseline of 3.9 years. completion of degrees at higher education levels. Pupils who experienced school closures in primary Literature on ‘summer learning losses’ indicates school later suffer salary losses of 2 – 3 percent that strong differences in learning losses on the labor market (Jaume and Willén, 2019). between children from different socio-economic They are also more often exposed to periods of backgrounds are likely due to the pandemic. On unemployment and work in occupations with lower average, over the summer months, students suffer skill requirements. In the poorer three quartiles of skill losses of approximately 10 percent of a standard South African schools where participation in a strike deviation (Hanushek and Woessmann, 2020). In was widespread in 2007, student performance in a Malawi, Slade et al. (2017) report a 0.38 standard subject taught by a striking teacher was estimated deviation decrease in reading scores during the at about 10 percent of a standard deviation lower three-month transition from grade one to grade two. than performance in a subject taught by a non- During a similar transition in Ghana, foundational striking teacher (Willis, 2015). The magnitude of the numeracy test differences showed a 66 percent loss effect is roughly equivalent to a quarter of a year’s in learning gains, with a near complete elimination lost learning, despite the average strike duration in of learning gains for those without books or these schools representing only seven per cent of reading materials at home (Sabates and Carter, official school days in a year. Finally, German students 2020). In reading, students from disadvantaged affected by two short school years in 1966/1967,31 backgrounds also suffered a pronounced loss of who received a total of three quarters of a year less skills. In contrast, the reading skills of pupils from instruction, achieved lower levels of skills in the long socio-economically better-off backgrounds tend to term: math skills in these students in their 50s to late increase slightly over the summer holidays. These 60s were still about a quarter of a standard deviation differences in skill loss during the summer holidays lower because of the two years of short schooling may be responsible for a considerable proportion (Hampf, 2019). And students affected by the short of the socio-economic differences in performance school years achieved an average of about 5 percent that arise during school life. lower earned income during their working lives (Cygan-Rehm, 2018). Table 2.4: Estimated learning losses in Rwanda Post-Covid (Scenarios) Post-Covid (Scenarios) Baseline Optimistic Intermediate Pessimistic Expected Years of Schooling (EYRS) 6.9 6.6 6.4 6.2 Harmonized Test Scores (HLO) 358 349 341 332 Learning-Adjusted Years of Schooling (LAYS) 3.9 3.7 3.5 3.3 Source: WBG staff estimates This was done in a few German states to standardize the nationwide 31 starting date of the school year to the Fall. The first lasted from April to November 1966, the second from December 1966 to July 1967. 28 Rwanda Economic Update • Edition No. 16 Social and Human Capital Impact of The Crisis Learning loss is very likely to impede long-term more advantaged peers, which in turn will translate productivity into deeper losses of lifetime earnings. The present Research from OECD countries suggests that the value of the economic losses to Rwanda may reach students in grades 1-12 affected by the closures US$55 billion (Table 2.5). might expect approximately 3 percent lower incomes over their lifetimes due to lower education Just returning schools to where they were in 2019 attainment and lower acquisition of skills. The will not avoid learning losses. As prior disruptions lower long-term growth related to such losses might are likely to increase the variations in learning levels yield an average of 1.5 percent lower annual GDP within individual classrooms, pivoting to more for the remainder of the century (Hanushek and individualized instruction could leave all students Woessmann, 2020). These economic losses would better off as schools resume. It is natural to focus grow if schools need to close again. The economic considerable attention on the mechanics and losses will be more deeply felt by disadvantaged logistics of safe re-opening. However, the long-term students. All indications are that students whose economic impacts also require serious attention, families are less able to support out-of-school because the losses already suffered demand careful learning will face larger learning losses than their re-opening approaches. Table 2.5: Estimate of income losses corresponding to a decline in learning-adjusted years of schooling Post-COVID (Scenarios) Post-COVID (Scenarios) Baseline Optimistic Intermediate Pessimistic Learning-Adjusted Years of Schooling (LAYS) 3.9 3.7 3.5 3.3 Average annual earning per student (2017 PPP US$) 2,460 2,416 2,375 2,334 PV of lifetime earnings for all students (US$ trillions)1/ 0.058 0.057 0.056 0.055 Source: WBG staff estimates Note: 1/ Present value calculations have the additional following assumptions: Years of working life = 45 years; Discount rate = 3%; The total enrollment number is adjusted with adult survival rate from Human Capital Index, 2020 database; It takes 20 years for all the currently enrolled student cohorts to enter the labor market; and average human capital utilization as per Pennings (2019) Rwanda Economic Update • Edition No. 16 29 PART THREE COVID-19 PANDEMIC – RESPONSE TO PROTECT AND PROMOTE HUMAN CAPITAL COVID-19 Pandemic – Response To Protect and Promote Human Capital 3.1. Introduction has further impaired human capital development Supporting Rwanda’s investment in human capital in Rwanda through reducing access to education and reversing the setbacks due to the pandemic and disrupting the delivery of essential health are important priorities in the short and medium- care services, with potentially dire implications for term. The World Bank’s analysis of cross-country productivity and long-term development. data on human capital indicates that Rwanda is underinvesting in the future productivity of its The Economic Recovery Plan (ERP) provides the citizens. Rwanda’s HCI score is quite low at 0.38; a framework for the government’s response to child born in Rwanda today will only be 38 percent the pandemic (see Box 3.1), although a series of as productive when she grows up as she could be if emergency measures also have been taken in the she enjoyed complete education and full health32. health and education sectors. The ERP includes Rwanda has an HCI index that is close to the global measures to strengthen social protection and assist low-income average (0.375) but lower than the firms affected by the pandemic, along with the Sub-Saharan Africa average (0.40) (see Figure 3.1). adoption of fiscal policies to support growth. The The low HCI is mainly driven by poor results in Social Protection Relief and Recovery component education (both in terms of average length of school provides: (i) relief to vulnerable households by easing attendance as well as learning outcomes), and by requirements for ongoing assistance programs, using high rates of stunting. The country’s stunting rate Rwanda’s extensive, decentralized administrative is slightly higher than the average for low-income structure to provide in-kind assistance, and improving countries, and the share of the relevant age group access to health and primary education services; that has completed primary and lower secondary and (ii) financial assistance to households and education is below the average of low-income micro-enterprises, and jobs through labor-intensive countries.33 As discussed in Chapter 2, the pandemic investment projects. Support for firms includes Figure 3.1: Human capital index (Rwanda in the Africa perspective) 0.65 0.60 World Average -‐ 0.56 0.55 0.50 Lower Middle-Income Average -‐ 0.48 0.45 Sub-Saharan Africa Average -‐ 0.40 0.40 Low Income Average -‐ 0.37 0.38 0.35 0.30 0.25 Central African Rep. Chad South Sudan Niger Mali Liberia Nigeria Mozambique Angola Sierra Leone Congo, Dem. Rep. Guinea eSwatini Sudan Rwanda Côte d'Ivoire Mauritania Ethiopia Burkina Faso Uganda Burundi Tanzania Madagascar Zambia Cameroon Benin Lesotho Comoros Malawi Botswana Congo, Rep. Senegal Gambia, The South Africa Togo Namibia Ghana Gabon Zimbabwe Kenya Mauritius Seychelles Source: Human Capital Index, World Bank Human Capital Index, World Bank, https://www.worldbank.org/en/ 32 publication/human-capital. The HCI measures the amount of human capital that a child born today can expect to attain by age 18 and is an indicator of the effectiveness of social investments. It looks across health, education, nutrition and skills and is calculated based on five indicators: probability of survival to age 5; children’s expected years of schooling; quality of learning; adult survival rate, and the proportion of children who are stunted. Rwanda Economic Update • Edition No. 16 31 COVID-19 Pandemic – Response To Protect and Promote Human Capital Box 3.1: Rwanda Economic Recovery Plan The Economic Recovery Plan (ERP) for the period from May 2020 to December 2021 will support vulnerable households and boost employment in the wake of the COVID-19 pandemic. The ERP includes measures related to fiscal policy, monetary policy, social assistance and support for firms. Expenditures envisioned under the program is estimated at 4.4 percent of GDP1/ by the government. Fiscal policy. The government plans to mobilize US$900 million to cover all expenditures tied to the pandemic, over the two fiscal years 2019/20 and 2020/21 (Government of Rwanda 2020). This amount is significantly larger, in percentage of GDP, than any plan announced by an East African Community (EAC) country or that of the largest African economies (except South Africa) as recorded by the IMF (Box Table 3.1). The government is relying mainly on support from development partners to finance the ERP. Multilateral and bilateral development partners providing additional financial support to Rwanda as of June 2020 include the World Bank,2/ the IMF,3/ the African Development Bank, UK and France. However, the amount of funding for the program that the government will be able to secure from donors is uncertain. Box Table 3.1: Government announcements of COVID-19 fiscal response, selected countries Country Fiscal expenditure announcements Burundi National contingency plan of 0.9% of GDP over 6 months. Increased oil and food reserves. Congo, Dem. Rep. Preparedness response plan of 0.3% of GDP plus tax forbearance measures Ethiopia Multisectoral preparedness and response plan of 1.6% of GDP Kenya Additional health expenditures of 0.4% of GDP and economic stimulus in 20/21 budget of 0.5% of GDP Nigeria 0.3% of GDP fund for health care, tax relief and to support employment by firms Rwanda Economic Recovery Plan estimated at 4.4 % of GDP South Africa Stimulus plan estimated at more than 10 percent of GDP. Other measures include accelerating tax reimbursements and credits, deferring tax liabilities, providing VAT rebates for selected products, and providing tax holiday for skills development. Tanzania Expedited payment of arrears with priority to affected SMEs. VAT and customs duties exemptions for imported medical equipment and supplies. Uganda Supplementary budget for health, security and vulnerable populations, and subsequent expenditures to mitigate impact of crisis, totaling 1.3% of GDP Source: https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#N as of June 12 Note: For Nigeria and Uganda, the IMF reports amounts in US dollars, and the ratio to GDP was calculated based on 2019 GDP data Social assistance. The ERP includes a Social Protection Relief and Recovery component, with a total budget of Rwf130 billion (around 1.4 percent of GDP). The relief component consists of using the administrative machinery available and easing requirements for ongoing programs, notably the government flagship social protection program, Vision 2020 Umurenge. In addition, Rwanda’s extensive, decentralized administrative structure meant the country could rapidly ramp-up effectively targeted, in-kind distributions to vulnerable households. The government also has removed the onemonth waiting period usually required before accessing medical services under the Community Based Health Insurance program, which provides health insurance to 80 percent of the population (Government of Rwanda 2020). The recovery component is intended to strengthen the resilience of households through transferring assets, providing access to financial services for micro-enterprises (including informal ones), providing selected households with toolkits to start new businesses, and providing jobs through labor intensive investment projects, mostly rural roads and terrace upgrading. The social protection response to COVID-19 also includes a series of accompanying measures to improve access to health care for vulnerable individuals without basic health insurance and to improve access to primary education. 32 Rwanda Economic Update • Edition No. 16 COVID-19 Pandemic – Response To Protect and Promote Human Capital Box 3.1: Rwanda Economic Recovery Plan (cont.) Support for firms. Support for private sector firms under the ERP aims to protect jobs (when possible) and stabilize living conditions and consumption levels, while positioning enterprises for long-term growth. A US$200 million “Economic Recovery Fund” has been established to provide subsidized loans to businesses in sectors affected by restrictions to prevent the spread of the virus (e.g. tourism), sectors particularly exposed to consumer discretionary spending, and those participating in global supply chains that have been disrupted. A special window supports micro and small enterprises in the informal sector via microfinance institutions, and provides credit guarantees through business development funds (BDFs). Firms also have been assisted through steps to ease the burden of tax administration (suspension of tax audits, extension of filing and payment deadlines, expanded use of online services in tax administration), to soften enforcement of tax arrears collection, and to fast-track VAT refunds and procurement procedures.4/ The ERP also includes support for sensitive and strategic sectors, and for infrastructure. A special strategy will be implemented for e-commerce, mining, tourism (promoting consumption by locals and citizens from the African Union), and agriculture. Infrastructure investments include for energy, transport, water and sanitation, ICT and urbanization. Note: 1 / This is the estimate in Government of Rwanda, 2020. The IMF estimated the program at about 3.3 percent of GDP (IMF 2020). 2 / The World Bank approved a US$14.25 million COVID-19 Emergency Response Project (P173855) and a US$100-million supplemental development policy operation (DPO), while the Human Capital for Inclusive Growth DPO (US$150 million) to be delivered in FY 21 also includes specific measures to accelerate recovery from the COVID-19 pandemic. 3 / The IMF’s Executive Board approved the disbursement of US$109.4 million under the Rapid Credit Facility (RCF) on April 2, 2020 and is considering a government request for a second RCF disbursement of a similar amount. 4 / The government estimates a loss in tax revenues of 2.8 percent of GDP per year in FY20 and FY21. Source: Government of Rwanda (2020) and IMF (2020) establishment of the Economic Recovery Fund to enterprises has been slow, due to the initial strict provide subsidized loans and credit guarantees eligibility criteria (subsequently relaxed) and slow to businesses in sectors affected by the pandemic take up by banks. The latter may be due to banks’ low (including for micro-enterprises), and steps to ease risk appetite and low interest margins under the ERF the burden of tax administration and delay some (6 to 8 percent compared to more than 11 percent required payments. Finally, strategies are being on other lending). For microbusinesses, channeling implemented to strengthen e-commerce, mining, of funds through Savings and Credit Cooperative tourism and agriculture, along with infrastructure Organizations (SACCOs) has been more successful, improvements. so that a greater focus on this window could help to speed disbursements. About 2/3 of the COVID19-related spending under the ERP adopted in May and budgeted for This chapter reviews how the government has FY 19/20 has been spent.34 There do not appear responded to this challenge in protecting health to be any significant spending bottlenecks due to and supporting education, and thus helping to absorptive capacity. The main driver of delays in preserve and to promote human capital. In general, budget execution has been in disbursements of Rwanda has responded rapidly and effectively to funds to vulnerable businesses under the Economic the health challenges posed by COVID-19, although Recovery Fund. While disbursements to hotels the impact nevertheless has been severe. The and restaurants increased sharply following the government also quickly set up remote learning to initial influx of money to the ERF, overall lending to compensate for the necessary closure of schools, although lack of access to computers and television has limited the most effective forms of remote This paragraph is based on the IMF report Rwanda -- Third Review 34 Under the Policy Coordination Instrument, December 2, 2020. learning, in particular for the poor and vulnerable. Rwanda Economic Update • Edition No. 16 33 COVID-19 Pandemic – Response To Protect and Promote Human Capital 3.2. Health Response • Rolling out a comprehensive set of non- Rwanda has managed the COVID-19 pandemic pharmaceutical interventions, including relatively well in comparison to other countries an initial six-week national lockdown policy; Rwanda quickly adopted a central government closures of schools and businesses; restrictions led, multi-sectoral approach at the onset of the on public gatherings and movements; and pandemic. The government’s response constitutes imposition of stringent enforcement measures emerging good practice with the potential to to ensure high rates of compliance (Annex III). become a COVID-19 success story. Highlights of the In line with international good practices, the response and areas that require further improvement government subsequently adopted a selective are as follows: lifting of measures with targeted lockdowns and mobility restrictions in hot spot areas • Putting in place COVID-19 multi-sectoral most affected by the pandemic, to minimize structures to manage the pandemic under the economic hardships. Studies conducted in other leadership of the Office of the Prime Minister. countries that have used non-pharmaceutical Even before the first cases were confirmed interventions suggest that these measures, in Rwanda, the government rapidly set up a and lockdowns in particular, have had a large COVID-19 National Steering Committee, a high- effect in reducing transmission (see Flaxman, et. level multi-ministerial coordinating body that Al, 2020). While a similar analysis has not been oversees the work of the COVID-19 Joint Task conducted in Rwanda, it appears likely that Force which is responsible for managing the these interventions had a similar, positive effect national response.35 in reducing transmission. • Developing a National COVID-19 Preparedness • Spearheading clear and consistent public and Response Plan and mobilizing domestic health messaging to maintain public trust and international funding to prevent, detect in government authorities and ensure a high and effectively respond to the pandemic. The level of compliance. The government used government’s initial 6-month, US$25 million its strong chain of command structures from plan was well designed, comprehensive, and the national level down to the sector/village/ consistent with global good practices (Annex III). cell level to effectively transmit public health It provided a good framework for development messages about the importance of regular mask partners to align their support. The plan was wearing and hand washing, and avoiding close subsequently revised to US$73.5 million, as needs contacts and large gatherings, while enforcing evolved over time. To date, the government has regulations stringently. Authorities disseminated successfully mobilized roughly US$39 million daily information on new cases and deaths, most from a wide range of development partners (e.g. affected districts, whether cases are imported or WB, USG, UN, Germany, Belgium, Global Fund, transmitted locally, virus transmission modes, GAVI, Red Cross) and the private sector (e.g. MTN and essential prevention measures the public Rwanda, AIRTEL Rwanda, Rotary Club). needs to observe. • Adopting a targeted approach to testing that The taskforce is assisted by several structures. An Expert Advisory Team 35 focused on high-risk groups (e.g. contacts of provides scientific advice for coordinated and informed decision- confirmed cases and travelers from hot spot making process. The COVID-19 Command Post consists of a multi- disciplinary team from the Ministry of Health/Rwanda Biomedical areas, healthcare staff, frontline rapid response Center responsible for the operationalization of the COVID-19 Plan and has four cells (i.e. Epidemiology Operations; Administration and workers, market vendors, and other essential Logistics; Communications, and Plans). 34 Rwanda Economic Update • Edition No. 16 COVID-19 Pandemic – Response To Protect and Promote Human Capital staff, such as hotel, bank and tax revenue had an occupancy rate of less than 60 percent, collectors) to ensure early detection and with contacts of positive cases who do not show containment.36 The Government also adopted symptoms expected to self-isolate. a pooled testing strategy for efficient use of • Establishing a designated national network resources, testing large number of asymptomatic of COVID-19 treatment sites. COVID-19 bed people and making optimal use of equipment capacity rose from about 125 (March) to roughly and costly tests kits, and ensured that routine 3,300 at the peak in cases (August 2020) and testing was not displaced by COVID-19. The total subsequently dropped as the number of cases number of laboratories capable of conducting declined sharply. While the recovery rate had testing and providing rapid responses rose from hovered around 60 percent for many months, it 1 in March to 12 by September, and the number has progressively increased since August (Figure of tests performed increased nine-fold through 3.1) and have now reached 96 percent (mid- August 2020. With a total of over half million October 2020). This reflects the prevalence of few tests performed to date and a low positivity rate; severe cases and the ability of the health system Rwanda’s testing strategy appears to be working to manage current workloads, an encouraging but will need to be sustained. trend. Preventing transmission to healthcare • Introducing an effective contact tracing and workers has been a major government priority, quarantine policy. The Ministry of Health rapidly and none have been infected to date. initiated screening of all travelers at points of • Setting up a complementary home-based entry with all contacts of positive cases (even care strategy in August 2020 for mild and asymptomatic ones) expected to quarantine asymptomatic cases that exhibit lower risks, to at designated isolation facilities with the full alleviate pressures on health workers and the cost covered by government. Rwanda used its health care system. Community-health workers strong network of public health officials, health and household members have been trained to care workers, and security personnel to conduct follow-up patients at home and report progress contact tracing and catch and quarantine to health facilities, seeking care as needed. contacts during the three-day window before Patients in home-based care have seen a steady they became infectious and transmit the disease. rise in recoveries (Figure 3.2). The government set up a network of isolation facilities, which by September reached 68 with Progress is essential in improving preparedness and a bed capacity of about 380 beds.37 As of end the response to infectious diseases September 2020, with the outbreak generally There is broad based recognition of the importance contained, all isolation facilities (except Kigali) of investing early in strong and resilient public health systems to promote health security. The COVID-19 pandemic has plunged countries into the Authorities developed an effective 2-phase testing strategy: (i) 36 using manual/automated molecular diagnostics (Real Time Reverse single largest public health and economic crises of our Transcriptase Polymerase Chain Reaction, RT-PCR), the gold standard for COVID-19 testing; and (ii) adding antigen testing to ramp up testing lifetime. Countries in Africa are likely to see decades in containment zones for point of care diagnosis and cartridge based tests (GeneXpert), which are better equipped for remote areas with of progress dissipate, with projected losses between fewer cases. US$37 and US$79 billion in output in 2020. Rwanda The number of isolation facilities has been changing over time 37 depending on the number of suspected cases with the government is no exception, with declines in GDP that have not also using boarding schools and hotels, as needed, during surges. In addition, each public hospital has prepared and reserved at least one been seen for decades. While the estimated annual room to isolate suspected cases, ensuring widespread availability of cost (US$2-3.5 billion) of epidemic preparedness in quarantine capacity. Rwanda Economic Update • Edition No. 16 35 COVID-19 Pandemic – Response To Protect and Promote Human Capital Figure 3.2: Cumulative number of recovered cases and recovery rate 100 5,500 5,000 80 4,500 4,000 3,500 60 Percent 3,000 2,500 40 2,000 1,500 20 1,000 500 0 - 16-Oct-20 25-Oct-20 14-Mar-20 23-Mar-20 12-Jun-20 21-Jun-20 30-Jun-20 12-Nov-20 21-Nov-20 30-Nov-20 10-Apr-20 19-Apr-20 28-Apr-20 7-Oct-20 14-Aug-20 23-Aug-20 3-Jun-20 18-Jul-20 27-Jul-20 3-Nov-20 10-Sep-20 19-Sep-20 28-Sep-20 1-Apr-20 16-May-20 25-May-20 5-Aug-20 9-Jul-20 7-May-20 1-Sep-20 Cumulative number of recovered cases Cumulative recovery rate Source: RBC Africa is steep, it is lower than the cost of inaction. Based on the JEE results, Rwanda in 2019 published Investing early is critical to quickly control disease a National Action Plan for Health Security (NAPHS). outbreaks that are occurring across the region and The NAPHS, which enjoys high-level political support, the globe. Moreover, more resilient health systems emphasizes the importance of maintaining essential are better able to minimize the adverse impact of health services during public health emergencies, disease outbreaks on essential services (see Chapter 2), promotes strong community mobilization and while many of the capabilities and infrastructure engagement, and aims to mobilize multiple required for preparedness can be leveraged for other stakeholders, all features of the government’s public health goals (e.g., combatting antimicrobial management of the COVID-19 response. The cost resistance, dealing with the rising burden of non- of the NAPHS (2020-2024) is estimated at US$61.5 communicable diseases). million (US$12.3 million/year) or roughly US$1 per person per year, not a huge amount compared to the The government has taken critical measures to costs associated with the loss of lives and livelihoods, bolster outbreak preparedness and strengthen and much lower than the estimated cost of the health security, but more needs to be done. Rwanda COVID-19 health response. scored 34.2 on the Global Health Security Index, which measures global health security capabilities, Rwanda has yet to devise a sustainable long-term and ranked 117 out of 195 countries. In 2018, Rwanda financing plan for the NAPHS. As seen globally, conducted a Joint External Evaluation (JEE) which it is not easy to prioritize investments in outbreak assessed the country’s capacity to prevent, detect, preparedness, particularly prevention, as the and rapidly respond to public health threats. Rwanda benefits are not immediately visible. Preparedness scored 58 percent, one of the highest in the region rarely ranks high on the list of government priorities, (Burundi: 33 percent; Tanzania: 48 percent; Kenya: with weak domestic resource mobilization leading 50 percent; Uganda: 56 percent) but lower than to chronic and sustained underinvestment.38 Yet the some of the best performing countries (Thailand: optimal source of financing for preparedness is the 76 percent, New Zealand: 89 percent; Japan: 92 domestic budget, which is the one governments percent), suggesting persistent gaps that need to be addressed (Annex III). 38 From Panic and Neglect to Investing in Health Security: Financing Pandemic Preparedness at a National Level, International Working Group on Financing Preparedness, December 2017. 36 Rwanda Economic Update • Edition No. 16 COVID-19 Pandemic – Response To Protect and Promote Human Capital Box 3.2: Early Lessons from Rwanda’s Response to COVID-19 • Speed of response: taking swift, early actions to contain the pandemic through strict lockdown policies, restricted public gatherings and movements; and mandatory mask use has paid off. • Synchronized approach: using a strong central government led strategy with involvement of multiple stakeholders and consistent messaging was critical to maintaining public confidence. • Science informed decisions: relying on a multi-disciplinary national task force to guide decisions on social distancing; formulating and implementing clear national testing, tracing, and treatment strategies; and using data triangulation to identify hot spot areas and target localized responses. • Systems optimization: promoting a health systems approach by leveraging community platforms for contact tracing, using pooled sampling to make best use of resources, and adopting home-based care models to minimize burden on hospitals. • System to identify new cases: it is critical to have a system in place to promptly identify new infections, as there are still many unknowns about COVID-19 and persistent risks of new surges are being seen regionally and globally. • Strategy to protect essential health services: ensuring that appropriate measures are put in place to mitigate the risk of setbacks to decades of progress made on health and nutrition. Source: WBG staff compilation control and hence can ensure predictability and 70 percent of primary school students but only 11 sustainability. Rwanda is not alone in favoring donor percent of secondary school students. A survey financing for investing in health security, given the by Innovations for Poverty Action in Rwanda in positive spillover effects for other countries. Given August 2020 estimates that 80 percent of children the importance of ensuring public safety, it is prudent in primary and secondary school spent time on to prioritize domestic financing and then leverage some form of remote education at home after private sector and donor support. schools closed, although there was considerable regional variation. 3.3. The Education Response The Ministry of Education was quick to make use of Many Rwandan students face difficulties in technology to provide distance learning through accessing remote learning, particularly those from multiple channels. The first teaching radio programs poor backgrounds or rural areas. Lack of access to were introduced just two weeks after the schools television, radio, the internet, educational programs closed, followed quickly by TV programs. A YouTube or learning materials were important reasons for channel and an e-learning platform were also ramped failure to participate in remote learning (Figure up, and free access provided to available e-learning 3.3). Students from households with greater levels portals. The government also used a variety of channels of connectivity, higher levels of parental education, (radio, TV, newspapers, various websites, WhatsApp, greater availability of parental time for engagement, Twitter and SMS messages) to inform parents and and in-home availability of books and materials students about distance learning arrangements. are better able to benefit from distance learning programs. Children from poorer primary schools The coverage of remote learning varies by grade reported using radio learning programs, while level and location. Data from UNICEF Rwanda wealthier primary school children reported using suggests that television and radio programs reached TV learning programs, WhatsApp groups created by Rwanda Economic Update • Edition No. 16 37 COVID-19 Pandemic – Response To Protect and Promote Human Capital the school, and educational content on the internet reopening in mid-October 2020 on a case by (Figure 3.4). This difference in modality is likely to case basis, upon inspection and fulfilment of lead to a further divergence in learning outcomes. health guidelines. Senior students in all Rwandan Learning losses in households without radios (26 primary and secondary schools resumed their percent of households) or television (90 percent) studies on November 2nd, 2020. Primary 4 pupils are likely to be sizeable. Access to remote learning and students in early secondary were instructed is further constrained because only 27 percent of to resume second term studies on November 23rd. households have continuous electricity (85 percent Students of primary one to primary three and of them in urban areas), only 3 percent of households nursery will have to wait for at least January next own a computer, and only 17 percent (also usually in year while continuing studying online, especially urban areas) have internet access. since public schools will run classes in shifts (morning/afternoon) to ensure social distancing. Children with disabilities face special difficulties in accessing remote learning. The Ministry The government has taken steps to improve tested different ways to continue supporting education and ensure safety with reopening. learners with disabilities (approximately 1 An additional 22,505 classrooms are being percent of the school going population) during constructed across the country to improve access the crisis. For instance, lessons broadcast on TV by reducing the distance many children face in and via e-learning platforms have sign language walking to school, and to improve educational interpretation, while learners with visual quality by reducing average class size to 45 from impairments are expected to access lessons over 75 and by eliminating double shifting once delivered via radio programs. However, these the pandemic is over. Measures to ensure the safe approaches reach only a small number of learners reopening schools include requiring everyone to with disabilities. For example, learners with visual wear masks, enforcing social distancing, providing disabilities complain about the lack of braille- for hand washing, and cleaning facilities. The translated materials. government also plans to implement remedial programs designed for both immediate response The Government has started reopening the on school reopening and medium to long term schools. Higher learning institutions started response to recover learning losses. Figure 3.3: Reasons for lack of participation in remote Figure 3.4: Differences in modality of remote learning among learning poor and non-poor households (Nationally representative, June 2020) (Nationally representative, June 2020) Lack of access to television Radio learning programs Lack of access to radio Lack of access to internet TV learning programs Lack of access to educational programs WhatsApp group created by school Lack of access to textbooks or learing materials Books provided by school Lack of motivation Lack of support from teachers and schools Their own school books Children are working to earn money Books in the household Children are taking care of their siblings HH members are teaching them Children are doing housework Lack of supervision from adults in the household Educational internet content There is not a good/quiet place to study O cial educational content Children need to spend their time doing other things 0 10 20 30 40 50 60 0 2 4 6 8 10 12 14 16 18 20 Percent Poor Non-poor Source: WBG staff estimates Source: WBG staff estimates 38 Rwanda Economic Update • Edition No. 16 COVID-19 Pandemic – Response To Protect and Promote Human Capital 3.4. The Social Protection Response constrained households with caring responsibilities; Enhancing social protection to better support and ii) the Nutrition Sensitive Direct Support (NSDS), investment in human capital and to protect a new co-responsibility cash transfer (CCT) scheme against shocks launched in 2018 to provide incentives to poor Given the sharp economic slowdown and increase households with pregnant women and/or children in poverty, social protection programs are now under age two to take up essential health and more important than ever. Besides supporting nutrition services during the early years. Simulations the poor, they can help protect Rwanda’s most indicate that the expansion in social safety nets vulnerable citizens from falling deeper into poverty. between 2016 and March 2020 (Table 3.1) accounted They can also play a central role in preventing for a reduction in the national poverty headcount households from resorting to detrimental coping ratio of 1.23 percentage points. strategies, such as selling productive assets or reducing food consumption drastically. In addition, The expansion in social protection programs social protection programs can slow down some of helped reduce poverty before the pandemic. the reversals in human capital investments through Simulations indicate that both economic growth and expansion of gender/child/nutrition-sensitive social expansion of social safety nets between 2016 and protection programs and helping reach those most March 2020 helped reduce the poverty headcount affected over the short and medium term, as well as from 38.2 to 35.6 just prior to the lockdown due to reinforce investments in agriculture. the pandemic. Over this period, economic growth accounted for poverty reduction of some 1.3 Rwanda entered the COVID-19 pandemic relatively percentage points, and expansions in social safety well prepared nets accounted for a further 1.23 percentage point Significant investments have been made to build reduction. The main expansions in social safety nets an integrated social protection system in Rwanda included the growth in DS from 95,906 households over the last decade. The Vision 2020 Umurenge in 2016 to 116,240 in March 2020 and the growth in Program (VUP) includes Direct Support (DS) cash cPW from 128,656 households to 157,852 over the transfers to the poorest families (Ubudehe category same period (see Table 3.1). The expansion in social 1) without labor capacity and a public works scheme safety nets also included the newly introduced ePW (cPW) that offers short-term work opportunities to program and NSDS programs, with their intrinsic households with labor capacity. Recent innovations sensitivity to gender and childcare. The ePW under the VUP include: i) the expanded Public Works reached 40,454 households as recipients by March (ePW) program, which offers year-round, flexible, 2020, while the NSDS reached 30,000 households part-time work opportunities to moderately labor- (see Table 3.1). Table 3.1: Expansion of the Vision 2020 Umurenge Program (VUP), 2016 to March 2020 Programs Beneficiary households 2016 March 2020 Classic Public Works (cPW) 128,656 157,852 Expanded Public Works (ePW) 0 40,454 Direct Support (DS) cash transfer 95,906 116,240 Nutrition Sensitive Direct Support (NSDS) 0 30,000 Source: Government of Rwanda Rwanda Economic Update • Edition No. 16 39 COVID-19 Pandemic – Response To Protect and Promote Human Capital Households in rural areas entered the crisis at coverage, the Government of Rwanda (GoR) greater risk of poverty and with higher vulnerability launched a Long-Term Savings Scheme (LTSS), locally to shocks. As outlined is section 2.2, poverty in known as Ejo Heza (translating as “bright future”), in Rwanda is largely a rural phenomenon. Moreover, December 2018. The design of the Ejo-Heza scheme rural households are also more vulnerable to shocks. takes into consideration the distinct characteristics Analysis using EICV5 finds that, in 2016/17, some of the informal sector, such as irregular and relatively 43.1 percent of households in rural areas were poor, low earnings, although the scheme is open to the and a further 12 percent were vulnerable to shocks39 participation of formal sector workers as well. Ejo- (see Figure 3.5). The corresponding urban figures are Heza is a voluntary defined contribution scheme, just 15.8 and 5.6. which is open to all Rwandans and foreigners residing in the country. The scheme allows for flexibility in Rwanda introduced innovations to increase social level and frequency of contributions, and leverages insurance coverage to the “missing middle” prior the digital infrastructure that Rwanda has in place. to the pandemic. Social insurance programs cover Ejo-Heza is designed to provide a special, means- those in the formal sector – some 13.5 percent of tested fiscal incentives package for the first three all households in Rwanda have at least one adult years to encourage mass-scale enrolments. With working in the formal sector. These households these incentives, the Government aims to inspire a reside predominantly in urban areas (36.4 percent of sustained savings discipline for all Rwandans, and households in urban areas have someone working especially those who are not insured as part of the in the formal sector and are not poor, compared to RSSB pension scheme. just 8.6 percent in rural areas). The VUP program, although expanding prior to the pandemic, covered Some 11 percent of the working age population only some 12 percent of the population, a fraction are already registered in Ejo Heza. Following the of the poor in Rwanda. This leaves a large “missing launch in 2018, about 36,000 participants were middle’’ segment of informal households (some registered in the first six months. With constant poor, many non-poor). Recognizing the need for all communication and outreach efforts, the scheme has Rwandans to have some form of social protection now reached over 800,000 participants or 11 percent Figure 3.5: More rural households are poor, and have lower levels of resilience to regular shocks Urban Rural 15.8 8.6 5.6 36.4 43.1 36.3 42.2 12.0 Poor Informal, non-poor, non-resilient Poor Informal, non-poor, non-resilient Informal, non-poor, resilient Formal, non-poor Informal, non-poor, resilient Formal, non-poor Notes: Analysis based on EICV5; and based on resilience of households to shocks faced in the previous 12 months. This graph does not show resilience against pandemic effects Vulnerability to shocks is measured by whether the household had 39 to resort to negative coping strategies in the face of the shock – i.e. reduce food consumption, sell productive assets, and so on. Note that the shocks included are from 2016, and do not include the COVID-19 pandemic shock. 40 Rwanda Economic Update • Edition No. 16 COVID-19 Pandemic – Response To Protect and Promote Human Capital of the working age population. What is particularly households in Kigali had received this emergency encouraging is that 48 percent of all registered cash transfer, with a further 8,400 expected to receive individuals are females. The total savings in the Ejo the transfer in October 2020. A second NGO, Plan Heza scheme has grown by 99 times since the first International, identified and delivered emergency six months of the launch and stands at 6 billion cash transfers to 7,653 vulnerable households in Rwf as of October 2020 (approx. 0.07% of GDP). Nyaruguru, Bugesera, Gatsibo, Nyagatare, Musanze, These savings are important for economic growth Rubavu and Rusizi Districts. These households were particularly if channeled to productive investments. engaged in cross-border trade (especially in Rusizi When Ejo Heza reaches an even larger scale then (i) and Rubavu districts) and other small businesses informal sector workers will have savings to fall back that were severely affected by the pandemic. A on; and (ii) the scheme can provide a platform for third NGO, World Vision International, has identified the government to deploy emergency cash benefits 27,945 vulnerable agricultural households (in the in response to a shock if needed, particularly for the countryside) that received cash transfers to enable vulnerable informal sector. them to purchase seeds and fertilizers for the current agriculture season. In all, some 55,000 families had Rwanda responded robustly, by expanding social received the emergency cash transfers by end protection programs, when the pandemic hit November 2020 (see Table 3.2). As in the education and health sectors, the government acted immediately to cushion The government also expanded the coverage of households in response to the pandemic. This the VUP program (see Table 3.2). In response to involved the distribution of food and other essential COVID-19, the government expanded the eligibility items to identified or self-reported affected criteria for the NSDS cash transfer. While only households. The intervention started in Kigali City vulnerable households in Ubudehe 141 with pregnant and has continued, including in other secondary women or children under two were eligible before the cities. The goal has been to increase coverage pandemic, the eligibility criteria have been expanded from 55,272 households in April 2020 to 112,882 to also include vulnerable households in Ubudehe 2. households by December 2020 and gradually replace This has resulted in the rapid expansion of NSDS food distribution with COVID-19 Emergency Cash from 31,000 beneficiaries in March 2020 to 84,599 Transfers, which have already started, in partnership beneficiaries by end September 2020. Currently 64 with non-government organizations (NGOs). Further, percent of eligible households in Ubudehe 1 and 2 the government approved a COVID-19 Economic with pregnant women or children less than 2 years Recovery Plan40 and started its implementation in in 17 districts are receiving NSDS benefits. While May 2020, which includes the scaling up of social the government also wanted to expand the ePW protection (see Box 3.1 for more details). program, this has been delayed due to COVID-19 restrictions, with only some 3,509 additional The government introduced emergency cash households covered by ePW since the pandemic transfers. In Kigali, the NGO Give Directly has partnered began. Finally, the expansion in cPW as well as DS with the government to enroll vulnerable recipients, each of whom receives two transfers that total 153.2 Ubudehe is a community-based targeting system, under which 41 thousands Rwf (~US$150). By September 2020, 19,486 households were classified into 4 Ubudehe categories. Recent legislation introduced reforms to the Ubudehe classification, increasing the number and changing the definitions of Ubudehe categories. The legislation also supported the introduction of a more objective targeting system, using household characteristics more Government of Rwanda, Economic Recovery Program, April 2020. 40 correlated with poverty, to improve targeting accuracy. Rwanda Economic Update • Edition No. 16 41 COVID-19 Pandemic – Response To Protect and Promote Human Capital has also been modest. The existing cPW beneficiaries and 2020 (Access to Finance Rwanda, 2016, 2020). – some 158,554 beneficiaries – have benefited from The increase in mobile money use was broad-based, the decision to waive work requirements in response increasing in urban and rural areas alike and across to the lockdown and were paid without a condition Ubudehe household categories. of working. The DS beneficiaries have expanded from 116,276 to 119,025. Except in the case of NSDS, However, the proportion of mobile money users expansion of VUP elements has fallen short of the is unequally distributed. Although 90 percent of targets that the government set in the Economic adults use mobile money in urban areas, only about Recovery Program (see Table 3.2). half of all adults do so in rural areas (see figure A5.1 in Annex V). Only about a third of adults in Ubudehe Rwanda took steps to improve social safety nets Category 1 and half of adults in Category 2 use digital delivery through mobile payments finance (see figure A5.2 in Annex V). The 2020 report Rwanda has put in place critical building blocks also finds disparities between gender: 68 percent of to scale up the use of digital cash transfers. adult men use mobile money compared to only 56 A technical review from earlier this year found percent among adult women. Lack of knowledge that Rwanda is on-track to achieve industry of digital finance (48 percent of non-users) is what interoperability, allowing consumers to use their keeps people from opening a mobile money account, preferred networks for their electronic transactions according the report. (World Bank, 2020b). The review also found that the government has an operational e-payment module In response to the pandemic, the Government of in the VUP Monitoring and Evaluation Information Rwanda took important steps to promote the more System (MEIS) that can disburse cash to SACCOs with widespread use of digital transactions, reduce cash a capability of linking with other payment service transactions and limit the spread of COVID-19. providers, has established full interoperability with Together with banks and telecom companies, the the national ID system that covers about 99 percent government temporarily waived mobile money of the population, and has an enabling regulatory transaction fees—including peer to peer transaction framework for G2P. fees, merchant payment fees, and fees for transfers between mobile wallets and accounts—beginning The use of mobile money has increased mid-March for an initial period of 90 days. In substantially over the last few years. According to addition, mobile money transaction limits were FinScope Financial Inclusion reports, the proportion increased. Though not particularly targeted towards of adults making use of mobile money increased the poor, these measures were expected to benefit from about 40 percent to 60 percent between 2016 informal sector workers and vulnerable households. Table 3.2: Scaling up of social safety nets, including emergency cash transfers, in response to the pandemic Beneficiary households Programs March 2020 September 2020 Target in Economic Recovery program Classic Public Works (cPW) 157,852 158,554 191,339 Expanded Public Works (ePW) 40,454 43,963 75,000 Direct Support (DS) cash transfer 116,240 119,025 150,000 Nutrition Sensitive Direct Support (NSDS) 30,000 84,599 74,021 COVID-19 Emergency Cash Transfers 0 35,000 100,000 Source: Government of Rwanda 42 Rwanda Economic Update • Edition No. 16 COVID-19 Pandemic – Response To Protect and Promote Human Capital Early indications suggest that mobile transactions reduce poverty by nearly 1.80 percentage points in soared immediately. For example, between mid- 2021 (Figure 3.7). March and late May, peer to peer transfers increased from US$11 million to US$73 million (IMF, 2020a; The poverty-reducing impact of social protection Carboni and Bester, 2020). varies by gender of the head of household and the location of the household. Female-headed Social protection programs play an important role households have higher poverty rates than male- in reducing poverty in Rwanda headed households (Figure 3.6) and, according Social protection programs are playing an to simulation results, benefit slightly more from important role in reducing poverty during the social protection as currently designed. Given the pandemic. Poverty rates are projected to rise by 2.2 expansion of social safety nets through September percentage points in 2020 and 5.1 percentage points 2020, it is estimated that poverty rates among male- in 2021 (Figure 3.6)42. However, the rise in poverty headed households declined by 1.4 percentage could have been much worse: simulations suggest points, compared to 1.5 percentage points among that the expansion of social protection since 2016, female-headed households (Figure 3.7).44 Also, and the further expansion from March to September poverty rates are higher in rural areas compared 2020, reduced the incidence of poverty by about to urban areas (Figure 3.7), and social protection 1.43 percentage points in 2020 (Figure 3.7). If the programs are able to reduce poverty more in rural government were to make no further expansions areas than in urban areas. but maintain social safety net (SSN) levels at Sept. 2020 levels, there would still be mitigation of poverty The performance of specific social protection in 2021, of about 1.29 percentage points43. If the instruments varies substantially. As mentioned government continued to expand SSNs, and reach above, the VUP programs, and emergency cash the targets set in the Economic Recovery Plan (ERP, transfers, if expanded to reach ERP targets, have see Table 3.2, last column) it has the potential to the potential of reducing poverty by nearly Figure 3.6: Poverty headcount ratio Figure 3.7: Poverty reduction due to social protections (percent of population) (percentage points) All Urban Rural Male Female 46% 43% 43% 42% 41% 41% 40% 39% 38% 38% -0.2% 37% 36% -0.5% -0.5% 19% -1.3% -1.3% 17% -1.3% -1.4% -1.4% 14% -1.5% -1.5% -1.6% -1.7% -1.8% -1.8% -2.0% All Urban Rural Male Female 2020 (with SSN expansion through Sept. 2020) 2021 (with no further SSN expansion beyond Sept. 2020) Pre-COVID (March 2020) 2020 2021 2021 (with SSN expansion to reach ERP targets) Source: World Bank staff estimates Source: World Bank staff estimates 42 The simulations here reflect the baseline scenario, along with mitigation through social protection programs. 44 This differentiated gender impact is consistent with the gender 43 The welfare of households is slightly lower in 2021 compared to disparities observed in the labor market. Women have higher 2020 so the same social safety net coverage will lead to slightly lower unemployment rates, lower employment rates, and earn lower wages reductions in poverty levels. on average. Rwanda Economic Update • Edition No. 16 43 COVID-19 Pandemic – Response To Protect and Promote Human Capital 1.8 percentage points in 2021. However, they with the poverty rate hovering around 40 percent, vary considerably in their coverage, targeting DS and NSDS accrue to many just below the poverty performance, and cost-effectiveness. Emergency line and can therefore lift them above it. A second cash transfers, in particular, reduce poverty by a reason could be that the benefit amount for public smaller amount, performing worse than public works works is given to the individual; so larger households (both classic and expanded public works) and direct with many people get the same transfer amount as support (both the regular direct support, as well as smaller households, given that each has one person NSDS – see Figure 3.8). Emergency cash transfers also performing public works. The benefit amount for have the objective of replacing the assets of people DS expands with household size, and this may pull who have lost their livelihoods in the informal larger households, which typically tend to be poorer, sector; poverty reduction is not necessarily their out of poverty. primary objective. Various programs play various roles in mitigating The distribution of beneficiaries is progressive for the impacts of the crisis. The direct support program public works programs and direct support, but is cost effective in terms of reducing poverty. The not for emergency cash transfers. Only 35 percent cPW and ePW also reach poor households – even if of recipients of the emergency cash transfers are they do not pull the households fully out of poverty, in the lowest two quintiles (Figure 3.9). In contrast, they are able to provide mitigation. Finally, while 63 percent of beneficiaries from public works (cPW the emergency cash transfer may not reduce the and ePW) and 55 percent of the beneficiaries from poverty headcount, it potentially plays the role of an direct support (DS and NSDS) are in the lowest two unemployment benefit,45 in the sense that it prevents quintiles. While the direct support (DS and NSDS) those in the informal sector who are affected by the and public works (cPW and ePW) are both reasonably crisis by smoothing their consumption and from well-targeted, the direct support leads to greater losing assets and falling into poverty. poverty reduction. One reason for this could be that, Figure 3.8: Poverty reduction by type of program Figure 3.9: Beneficiary incidence by social protection program (percentage points) (percent) 2020 2021 2021 35% (with SSN expansion (with no further expansion (with SSN expansion through Sept. 2020) beyond Sept. 2020) to reach ERP targets) 28% 28% 27% 24% -0.2% -0.2% 22% 20% 20% 19% -0.5% 18% -0.5% -0.6% 17% 16% -0.7% 13% -0.8% -1.0% 8% -1.3% 5% -1.4% -1.8% Emergency cash transfers cPW and ePW DS and NSDS Emergency cash transfers cPW and ePW DS and NSDS All Q1 Q2 Q3 Q4 Q5 Source: World Bank staff estimates Source: World Bank staff estimates 45 In the absence of such a benefit for those who work in the informal sector. 44 Rwanda Economic Update • Edition No. 16 PART FOUR POLICY RECOMMENDATIONS Rwanda Economic Update • Edition No. 16 45 Policy Recommendations 4.1. Introduction greater capacities, while minimizing the adverse The previous chapters have analyzed the impact impact on essential health services. But Rwanda of the COVID-19 pandemic on recent economic can be even better prepared for the next outbreak, developments and long-term growth; the impact take steps to strengthen the health care system, and on welfare, poverty, health and education; and the advance critical reforms in the national community government’s response to the pandemic in terms of health insurance scheme and in human resources. health, education and social protection policies. This The main policy recommendations are: chapter provides tentative policy recommendations • Strengthen health security to further enhance for the government based on this analysis, covering pandemic preparedness. Rwanda needs fiscal, health, social protection and education to ‘stay on course,’ continuing to promptly policies. These recommendations are adapted to identify new infections and contain localized World Bank COVID-19 Crisis Response Framework surges without disrupting essential health that emphasizes (a) saving lives; (b) protecting the services and impeding livelihoods. In addition poor and vulnerable; and (c) strengthening policies, to continuing with mass testing and tracing, institutions, and investments for building back better Rwanda may consider a number of additional (see Figure 4.1). strategies used by other well performing countries, such as: (i) undertaking serological 4.2. Save Lives: Controlling the Pandemic and surveys to study infection rates in different Boosting Health System Capacity population/occupation groups; (ii) introducing Rwanda was reasonably well prepared and blood observatories to routinely track evolving managed the response to the COVID-19 pandemic infections by testing blood donations; (iii) much better than many other countries with leveraging molecular diagnostics such as the Figure 4.1: Relief, restructuring, and resilient recovery Relief Restructuring Resilient Recovery • Prepare health systems for future • Mitigate disruptions in essential • Further enhance pandemic public health crises health and nutrition services preparedness • Fully fund and implement National Save Lives • Strengthen health services, Action Plan for Health Security • Accelerate deployment of COVID-19 vaccine including improved monitoring • Ensure budget reserves are set aside to enable rapid response • Increase coverage of VUP to protect • Increase targeting accuracy of VUP • Improve cashless modes of payment the poorest to remain e ective at less cost • Link teacher management systems • Improve e ectiveness of Emergency • Improve design and coverage of Ejo with student learning outcomes Protect the Poor Cash Transfers in reducing poverty Heza scheme • Invest in relevant skills for greater and Most • Recover learning losses: tracking • Train teachers to teach at the right response to labor markets Vulnerable at-risk students for reenrollment and level with system level guidance • Reduce the digital divide, and train remedial support • Assess learning more frequently and students and teachers in e ective • Make schools safer with WASH on global benchmarks use of technology • Strengthen revenue mobilization Strengthen • Improve public nancial management • Increase investments in human capital, ensuring inclusion of youth Policies, • Strengthen infrastructure • Create scal space to invest in • Deliver rapid training of health care Institutions, and public health and social safety nets • Timelier data and feedback to link professionals Investments for to protect poor and vulnerable learning with instruction and inputs • Adopt blended learning approaches Rebuilding • Coordinate better between combining remote technology and Better sub-sectors to facilitate uninterrupted classroom instruction student ow and completion Source: World Bank (2020c) 46 Rwanda Economic Update • Edition No. 16 Policy Recommendations GeneXpert for COVID19 testing in remote areas; national vaccination targets. Primary health care and (iv) modifying the COVID-19 Preparedness facilities need to be strengthened to ensure they and Response Plan to include explicit measures are able to screen the broader population for to protect essential health and nutrition services co-morbidities (e.g., cardiovascular, diabetes, and target the most vulnerable groups. cancers) that place individuals at greater risk of • Mitigate disruptions in essential health and COVID-19. Once diagnosed, these individuals nutrition services. Rwanda has managed to will be prioritized for the COVID-19 vaccination avoid dramatic disruptions; at the same time, program. The main priorities are to: (i) develop the country has experienced some supply- and clear criteria and a prioritized list of individuals demand-related disruptions in key services, such for the COVID-19 vaccine; (ii) elaborate a roll as immunizations and institutional deliveries. out plan with different scenarios, as different It is critical to ensure primary health services vaccine(s) will have different cold chain are able to both tackle outbreaks and deliver requirements; and (iii) identify and pilot different essential services during outbreaks. strategies, such as couples testing at health facilities during antenatal care visits, and testing • Strengthen health services, income support at NCD clinics or during national campaigns. In and monitoring. Key recommendations for addition, there is need to strengthen COVID-19 health services include steps to minimize the vaccine financing, including budgeting and risk of infection in health facilities, increased expenditure tracking. access to health appointments and medications, an expansion of the use of mobile phone • Ensure optimal allocation for pandemic messaging and telemedicine consultations, preparedness. Rwanda’s JEE score highlighted and improvements to community health care gaps in the prevention, detection and platforms. Support to vulnerable households rapid response to public health threats. The should be increased by scaling up the VUP, government recognizes the importance of reducing the risk of food insecurity through improving health systems for future adverse targeted food distribution and ensuring events and has prepared a costed National the safe operation of the food supply chain Action Plan for Health Security, estimated at and food markets, and expanding access to US$61.5 million. The main priority at this stage emergency cash transfers. Efforts to improve is to ensure that the plan is fully funded and the monitoring of health and nutrition effectively implemented. To enhance prospects services should focus on the use of digital for sustainability, it is preferable to prioritize tools, collection of data on the nutritional domestic financing. To this end, the government status of children and women, and increasing needs to consider several options: (i) explore the completeness and timeliness of health feasibility of expanding the fiscal space (i.e. data reporting at public and faith-based health through efficiency gains in taxation and/or facilities (see Annex III for details). earmarked taxes); (ii) engage private sector firms • Accelerate deployment of COVID-19 vaccine. through their corporate social responsibility The availability and equitable deployment of spending on pandemic preparedness; and (iii) a safe and effective vaccine is the single most incorporate metrics of country readiness to important measure for saving lives and for deal with pandemics in national plans to attract fully re-opening the economy. A strong public foreign investors, making Rwanda an even more health response will be critical to achieving the attractive destination for investors. Rwanda Economic Update • Edition No. 16 47 Policy Recommendations 4.3. Protect the poor and most vulnerable • Increase the coverage of the VUP program to The two key goals are to strengthen social protection continue to combat the negative effects of programs and to recover the learning losses COVID-19, both in the short and long term. experienced by disadvantaged children. There has been a large increase in the number of poor households due to the pandemic. These 4.3.1. Strengthen social protection households will continue to need support in the Key priorities for social protection programs include: short and medium term. While the emergency response to COVID-19 already expands VUP • Continue to invest in improving the design coverage, it is clear that further expansion would of social safety nets and social insurance to be important, given the predicted long-term make them more adaptive. Countries that enter impacts on human capital. a crisis with good social protection programs • Improve overall targeting accuracy, so that and systems are better prepared to mount a the poor are more effectively reached, within quick and effective response to the crisis. For the limited fiscal envelope. The government instance, Abay et al (2020) find that, in Ethiopia, is working to improve the targeting of the VUP. recipients of the Productive Safety Net Program The program currently uses community-based (PSNP) were protected from virtually all the targeting (called Ubudehe). The government increase in food insecurity due to COVID-1946. is building a more objective targeting system, Moreover, being prepared ex ante reduces the which will be based on a household welfare cost of emergency response. Finally, it would be scorecard (HWS). Of the households in Ubudehe important for Rwanda to set up an emergency fund so that it has the fiscal resources to respond category 1, who theoretically are eligible to when a crisis hits (see more on adaptive safety receive benefits under the VUP and other social nets below). programs, only 46 percent are poor (Figure 4.2). By contrast, the share of poor identified by the • Invest in building an evidence base and HWS is 73 percent. A social registry is being set- improve monitoring and evaluation of the up to support this improvement in dynamic effects of social protection programs. In order targeting of the poor and vulnerable. to improve the design of the social protection system, it would be important to understand Figure 4.2: Share of poor identified—Ubudehe vs. household welfare scorecard which social protection programs are more effective in achieving stated objectives – 27% whether poverty reduction or graduation. For 54% instance, the simulations in this report suggest that the human capital focused programs, such 73% as NSDS and ePW, were effective in decreasing 46% poverty both pre-pandemic as well as in the 6 months following imposition of the lockdown. Share of poor Share of households households in Ubudehe identi ed with HWS targeting It would be important to measure such effects Category 1 (# of households equivalent to through well designed surveys, as well as Poor Non-poor Ubudehe 1) through in-depth understanding of the impacts Source: World Bank Staff analysis based on EICV 5 data of these programs on the beneficiary family. 46 PSNP households were also less likely to reduce expenditures on health and education compared to non-PSNP households. 48 Rwanda Economic Update • Edition No. 16 Policy Recommendations • Monitor the performance of the Ejo Heza protocols and ensuring that all schools are scheme, improve design and increase efforts equipped with adequate hygiene and sanitation to expand coverage. Given the size of those facilities. For effective operationalization of employed informally, and the effects of the the National School Reopening Plan and pandemic on this segment of the population, the Sector COVID19 Response Strategy, it would be important to continue to invest in sustained efforts must be made to train school expanding social insurance. personnel to ensure compliance to necessary • Adaptive social protection systems can standards. Effective communication and social reduce the cost of responding to shocks. messaging strategies could mobilize students The largest shocks affecting rural households and teachers to influence health-seeking (notwithstanding the pandemic) are climate practices in households and communities related. Understanding the nature, frequency thereby strengthening possibilities of reduced and geographical location of floods, droughts, transmission and uninterrupted return to school. and other climate events, can help the • Track and support reenrollment to ensure government build scalable safety nets. The nobody is left behind. This is also an opportunity objectives of scalable safety nets are to (i) be to target those vulnerable school-age children prepared before occurrence of the shock; (ii) who were already out of school before the respond immediately, so that detrimental pandemic. The ongoing staggered reopening effects are minimized; (iii) scale-up social safety of schools has proven to be a complex process net payments to households affected by the and will continue to face risks of possible cycles shock, on a temporary basis; and (iv) mitigate of reclosing during flareups. Active investments where possible. In addition to the social registry, toward back-to-school campaigns or which contains information to enable quick reenrollment drives currently supported under response to shocks, the government will also the Quality Basic Project must be sustained need to choose the right financing mechanism to minimize student dropout and out-of- to support the scaling up. school population. Targeted interventions for • Promote the use of cashless modes of payment girls, children with disability, and low-income and support the poorest to realize the benefits. families, in the form of scholarships, additional While the use of mobile money has increased subsidies for school feeding, and support with substantially in Rwanda over the last few years, scholastic materials, would be critical to offset access lags behind in rural areas and among the the opportunity cost to education for this poorest households. As the government improves vulnerable group of students. A stronger focus digital services, it would be important to ensure that on teacher retention would now be more critical extra efforts are made to include rural areas and than ever to preserve and improve student to those in the poorer segments of the population. qualified teacher ratio. • Recover learning losses to prevent permanent 4.3.2. Return all children to school safely and recover impacts on the opportunities of children learning losses and youth. This will require a combination of Key priorities for education programs could aim to: measures targeted at reversing learning losses • Protect student and teacher health and safety such as – improved classroom assessment, as they return to school. This includes adoption focused remedial instruction and curriculum, and stringent application of infection preventive and blended use of in-class teaching and Rwanda Economic Update • Edition No. 16 49 Policy Recommendations technology for remote learning. Given the learning. Strategic and systemic investments recent policy and institutional reforms towards parent education and community (Presidential Order No. 064/01 of March engagement for both medium- and long-term 16, 2020) in teacher management system sector development and performance could be that prioritizes performance and capacity emphasized with renewed focus on the Adult development, the sector is well equipped Literacy Policy and the in the ongoing revisions to institute relevant changes to the role and to the National Education Policy. qualifications of teachers, principals, and local education officers to respond to the emerging 4.4. Strengthen Policies, Institutions, and needs of Rwandan students. These efforts will Investments for Rebuilding Better need clear system-level guidance and materials While the short-term priority should be on such as practical trainings for teachers and fiscal expansion to contain the pandemic and other school personnel, scripted lesson plans to mitigate its economic-socio impacts, the country enable teaching at the right level, and formative should maintain the focus on achieving fiscal classroom assessments with stronger linkage to consolidation over the medium-term. The global competency standards. All these efforts government needs greater fiscal flexibility in the must be aimed towards targeted learning short term to protect the most vulnerable and outcomes in reading, writing, numeracy at preserve hard earned gains of the last decades on foundational levels, and towards market social priorities and human capital development. relevant skills and positive social outcomes at In the medium term, the country should aim at higher levels of education. achieving fiscal consolidation to create fiscal space • Build back education systems more equitable needed for greater investment in human capital to and resilient than before. Effective use of transition from the public investment-led growth technology in remote learning systems, in early- model to a new TFP/human capital-led growth warning systems to prevent dropout, and in strategy that puts the country on a higher and more making learning more engaging and retainable inclusive growth path. The expansionary public could bring in transformational changes in the investments policy of recent years has been made sector. Equity gaps are now more evident and possible in part thanks to consolidation of recurrent provide better understanding of the impact of spending. Therefore, the key reform priority should digital divide. Targeted efforts being led by the be on prudent design of the public investment Government with partner support to bridge program, in terms of both total size and optimal differences in digital skills of teachers and access sector allocation of projects, while improving to hardware, connectivity, relevant content, and control of expenditures to increase efficiency. The learning management platforms are critical Government ambition to adopt a medium-term to a forward-looking system strengthening public investment program based on review and strategy. However, all these require additional optimization of the existing pipeline for improved resources, especially at a time when families will project mix, agreed in the World Bank Human Capital be less able to support education at home and DPO, should provide an appropriate platform. The demands on public provision might increase. ongoing Public Expenditures Review with special Finally, during this crisis, home learning focus on human capital (education, health, social environment of students has proven to be a protection) in collaboration with the World Bank key driving factor in ensuring continuity of and the upcoming Public Investment Management 50 Rwanda Economic Update • Edition No. 16 Policy Recommendations Assessment (PIMA) in collaboration with the IMF Improving education systems with greater capacity, would be critical to operationalize the medium-term sub-sector coordination, and linkage to outcomes planning program. in learning and employability is necessary for rebuilding and resource optimization. The crisis Strengthening revenue mobilization reforms sheds light on key areas of reforms in sector policy is critical for fiscal sustainability. Tax measures and institutions that could help build back better. undertaken to mitigate the economic impact of the Firstly, efforts will be needed to link clear mandates crisis should be walked back to normal requirements and accountability structures with learning outcomes as conditions allow. The government should and other key impact indicators. For this timelier continue with the development of a medium-term data with effective feedback loop that links learning revenue strategy (including a VAT gap analysis), to instructional practice and material resources is an assessment of tax expenditures, and an overall necessary. Secondly, greater alignment across sub- diagnostic of the policy and legislative framework, sectors is paramount to efficiency and effectiveness as agreed in the IMF’s three-year Policy Coordination in resource coordination and deployment. For Instrument approved in June 2019. example, by strengthening curricular alignment across grades, and ensuring that the quality of Improving public financial management is key teaching remains consistently good across pre- to improve the use of limited public resources. primary, primary, secondary, and tertiary, the Although Rwanda’s public financial management sector could achieve greater completion rates and is generally considered strong, there are areas for maximize returns to investment at any sub-sector improvement. The government’s efforts to implement level. The planned institutional reforms agreed transparent and credible financial management in the World Bank Human Capital DPO (including practices will be needed, notably in undertaking more the approval of the revised Education Law in fiscal risk analysis and management and publishing December 2020) should relieve the sector of some more fiscal reports, as well as strengthening the longstanding issues constraining and delaying oversight and management of SOEs and PPPs. student flow in basic education. Thirdly, government capacity could benefit from greater investments in Strengthening infrastructure will be essential building future cadre of education leaders through to achieve a sustained improvement in human quality higher education, meritocratic selection capital. For example, a reliable supply of electricity and promotion, and incentives to attract and retain and greater access to high speed internet would talented human resource. 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Rwanda Economic Update • Edition No. 16 53 ANNEXES ANNEX I: LABOR MARKETS Recent labor market trends sectors (Figure A1.2). Among the largest sectors of Employment fell sharply in Rwanda through the the economy, employment fell in the agriculture, lockdown period. Between February and May manufacturing, transport and storage, and 2020, aggregate employment fell by nearly 370,000, accommodation and food service activities, but equivalent to a 10 percent fall in employment. increased in construction and wholesale and retail The employment to population ratio decreased trade sectors following the resumption of activities from 48.3 to 43 percent (Figure A1.1), with larger and movement. In relative terms, employment decreases among female workers (6.2 percentage decreased the most in the mining, accommodation points, vs 4 percentage points among male workers) and food services, professional, scientific and and workers in urban areas (nearly 10 percentage technical activities, and arts and entertainment points, vs 4 percentage points in rural areas). Not sectors, declining by 30 to 70 percent. Those surprisingly, unemployment soared over this same without formal education and those with period from 13 to 22 percent. university education experienced large decreases in employment (-25 percent and -17 percent The loss of employment between February and respectively), while employment rates remained May 2020 was distributed unequally across more or less steady or increased for all other workers. Figure A1.1: Main Labor Market Indicators by Selected Groups: Rwanda 2020 (percent) Employment to Population Ratio: 2020 Unemployment Rate (%): 2020 70.0 30.0 60.0 50.0 20.0 40.0 30.0 10.0 Feb May Aug Feb May Aug All Female Male Rural Urban All Female Male Rural Urban Source: Rwanda Labor Force Survey, various issues. Figure A1.2: Employment by Sector: Rwanda 2020 (In thousands) 4,000 350 3,500 300 3,000 250 2,500 200 2,000 150 1,500 100 1,000 500 50 - - Employed Agriculture, forestry Construction Wholesale, retail trade, Manufacturing Transportation Accommodation Information Public Education Human health population and shing repair of motor vehicles, and storage and food and administration and motorcylces service communication and defence social work activities activities February May August February May August Source: Rwanda Labor Force Survey, various issues. Rwanda Economic Update • Edition No. 16 55 Annex Figure A1.3: Employment by Educational Attainment: Figure A1.4: Change in Salary: Before and After the Lockdown Rwanda 2020 (In percent of total) (In thousands) 4,000 0 25 50 75 100 All employed population Agriculture, forestry and shing Mining and quarrying Manufacturing 3,000 Electricity, gas, steam and air conditioning supply Water supply, sewerage and waste management Construction Wholesale, retail trade, repair of motor vehicles, motorcylces Transportation and storage 2,000 Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scienti c and technical activities 1,000 Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation 0 Other service activities All None Primary Lower Upper University Activities of households as employers secondary secondary Activities of extraterritorial organizations and bodies February May August Less Same More Don't Know Source: Rwanda Labor Force Survey, various issues. Source: Rwanda Labor Force Survey, May 2020 The majority of those who kept their jobs through still above pre-lockdown levels. This is in part due the lockdown reported lower earnings (Figure to labor force participation rising from 55 to 58 A1.4). On average, nearly 60 percent of workers percent– i.e., more people have entered the labor reported receiving lower salaries during the force to look for jobs. lockdown. Among the largest sectors in Rwanda, such as the agriculture, manufacturing and education The impact of the crisis on female employment sectors, the overwhelming majority reported lower Women have been hit hard by the labor market salaries. Even where employment increased – such impact of the pandemic. As reported above, female as in the construction, wholesale and retail trade employment and unemployment rates are not yet sectors—60 to 80 percent of workers reported back to their pre-lockdown levels. In addition, while receiving lower salaries. the male labor force participation rate increased between February and May, the female labor Employment recovered between May and August force participation rate fell by a percentage point, 2020, though unemployment rate remains above suggesting that the rate of joblessness among pre-lockdown levels. On average, employment rates women is higher, considering both the rise in are back to their pre-lockdown levels, in both rural unemployment and the movement out of the and urban areas (Figure A1.1). Employment rates in labor force. manufacturing, transport, accommodation have also recovered or have exceeded their pre-lockdown rates, Gender differences in the labor market impact of while employment rates in construction, wholesale the pandemic reflect, in part, gender differences and retail trade have continued to rise (Figure A1.2). in the structure of employment and the gender However, the employment rate in the agriculture division of household responsibilities. Two things sector—which employs a third of workers in might help explain why the labor market impact Rwanda—continues to drop. In addition, the female has been larger among women. First, just before employment rate and the employment rate among the lockdown (February 2020), 52 percent of female those with no formal education are still below pre- workers but only 37 percent of male workers were lockdown levels. And while unemployment rates employed in the agriculture sector, which has not have fallen from their May 2020 high, they are seen a recovery of employment levels (Figure A1.5). 56 Rwanda Economic Update • Edition No. 16 Annex Figure A1.5 Employment by Sector and by Gender: Rwanda February 2020 (In percent) Male Female Other, 0.24% Other Agriculture, forestry 0.35% and shing, 37.1% Wholesale, retail trade, repair of Agriculture, motor vehicles, forestry and motorcylces, shing, 13.6% 52.1% Wholesale, retail trade, repair of motor vehicles, Construction, Manufacturing, 4.3% motorcylces, Construction, 5.4% Manufacturing, 10.4% 12.3% 5.5% Source: Rwanda Labor Force Survey, May 2020 Figure A1.6. Reasons for Unemployment by Gender: Rwanda May 2020 (In percent) Male Female Movement Inadequate working Inadequate working restriction situation Movement situation 3% 1% restriction 0% Quarantined Quarantined 2% 0% 0% Business / gov't Seasonal worker Business / gov't closed due to COVID 19 31% closed due to COVID 19 28% 39% Seasonal worker 44% Business / gov't Need to care for closed for another reason ill relative 3% 1% Sick Laid o while 2% Business / gov't Need to care for closed for another reason ill relative business continues Vacation 14% Vacation Laid o while 4% 4% Sick 0% 1% business continues 5% 18% Source: Rwanda Labor Force Survey, May 2020 In addition, men were more likely to be employed Even when employed, women earn less than men on in construction (12 percent versus 4 percent), a average. On average, women’s monthly earnings are sector where employment has continued to grow about 68 percent of men’s monthly earnings. These through the lockdown, though women were more are raw averages and do not control for years of likely to be employed in wholesale and retail trade, experience, occupation, sectors of employment, and where employment also has expanded through the other characteristics typically controlled for when lockdown. Second, when asked for reasons for their comparing conditional averages. The gender wage unemployment in May of this year, women were gap rises with age (Figure A1.7, left panel) and rises more likely to report that they were seasonal workers and then falls with educational attainment (Figure (44 percent versus 31 percent) and were more likely A1.7, right panel). The gender wage gap is narrower to be taking care of a sick relative (4 percent versus in urban areas. In fact, among urban workers with 1 percent). upper secondary education, the women earn more than men, on average. Rwanda Economic Update • Edition No. 16 57 Annex Figure A1.7: Women’s Average Monthly Earnings by Age Group and Educational Attainment: Rwanda May 2020 (In percent of men’s average monthly earnings) 1.0 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.0 0.0 16-24 yrs 25-34 yrs 35-54 yrs 55-64 yrs 65+yrs None Primary Lower secondary Upper secondary University Source: Rwanda Labor Force Survey, May 2020 58 Rwanda Economic Update • Edition No. 16 Annex ANNEX II: CGE ANALYSIS The CGE model of Rwanda- methodology and data Macro fiscal closures are such that the government The Rwanda CGE model is a single country recursive budget balance closure determines government dynamic model. It is an adapted version of the World savings. We adapt an endogenous budget balance Bank Mitigation, Adaptation and New Technologies and fixed tax rates. Government consumption and Applied General Equilibrium (MANAGE) model. In investment are fixed in real terms and calibrated addition to the standard features of a single country in the baseline to reflect past performance. Any CGE model, the MANAGE model includes a detailed surplus is used to pay off debt, and any deficit is energy specification that allows for capital/labor/ funded by debt. The level of investment in the energy substitution in production, intra-fuel energy economy is determined through a savings-driven substitution across all demand agents, and a multi- closure with exogenous propensity to save for output, multi-input production structure. The households and firms. Regarding the external sector, specificities of the MANAGE model are described in we assume exogenous foreign savings in foreign detail in Van der Mensbrugghe (2017). currency calibrated to match historical data and projections. The nominal exchange rate is fixed. The The MANAGE model for Rwanda was extended real exchange rate adjusts to maintain the current for the analysis of the economic effects of the account balance. CIVID-19 crisis. The model is calibrated to the social accounting matrix (SAM) for the year 2017 (IFPRI, Key assumptions 2020). The SAM includes transaction flows for 47 A. International Channels. The following sectors, 78 commodities, and 3 types of factors of assumptions are made: production: labor, land, and capital. There are 8 labor Trade. The global pandemic has affected trade flows categories distinguished by education level and of goods and services affecting Rwandan exports rural-urban divide: the uneducated, and those with and imports. Imports and exports decline according primary, secondary or tertiary education allowing to Formal External Trade in Goods Statistics report the distinction between the unskilled and semi- (Quarter 2, 2020). The changes are corrected for the skilled/skilled labor. Production is modelled using change in trade between Quarter 2 of 2019 and 2018. a nested CES structure. Labor supply is a function of real wages for each category of labor, and we Foreign direct investment. FDI declines because assume partially flexible wages and labor supply. of increased uncertainty about the future There are 15 household categories distinguished and interruptions to international travel and by income/consumption decile for the urban, rural communication. Further, many foreign investments farm and rural non-farm. Other institutions include rely on expatriates from advanced countries, and enterprises, the government, and the rest of the these people are likely to be less willing to travel at all, world. There are several tax/subsidy accounts, or to travel to areas with weaker health systems. A 6.1 including import tariffs, indirect taxes as well as percent reduction is implemented based on Rwanda direct income taxes. Investment is distinguished Quarterly International Investment Position – IIP. between public and private. The model is run for 14 periods, from 2017 to 2030. Rwanda Economic Update • Edition No. 16 59 Annex Remittances. The slowdown of economic activity in The size of the shock for Rwanda corresponds to the the host countries where Rwandan migrants work level of change estimated by the International Labor affects remittance flows. A decline of 10 percent has Organization (ILO 2020), which corresponds to a loss been observed between the first and second quarter of 4.9 percent working days. of 2020. Estimation using the Bank macro model MFMOD indicate a 22 percent reduction in 2020. Capital utilization. Avoidance of workplaces by workers will inevitably cause capital, such as B. Domestic Channels machinery and so forth, to be left idle for longer In addition to the international transmission periods of time, which will result in lower capital mechanisms, the scenario reflects domestic responses utilization. Further, increased uncertainty would by governments to prevent infection from spreading cause some investments to be postponed or and to cushion the impact of the outbreak on the canceled. This effect is captured by decreasing the economy. It also captures “avoidance behavior,” as productivity of capital based on the Africa Pulse fear of the disease causes behavioral changes in the report World Bank (2020). A 2.77 percent reduction main economic actors. Following the World Bank is implemented. reports on the Ebola outbreak in Western Africa (World Bank, 2015) and the Democratic Republic Labor productivity effect. This effect captures the loss of Congo (World Bank, 2019), this study assumes in labor productivity due to the restrictions on the that these behavioral changes impair the efficiency mobility of people. Estimates are based on Dieppe of markets, which slows economic activities and (2020) and assume a 1.9 percent reduction. has medium- and long-term effects. The main implications of avoidance in economic interactions Trade. It is assumed that trade transaction costs are limitations on access to markets and increased increase for goods and services because of border risk and uncertainty. The domestic channels through closures, delays due to slowdown in logistics, which economies would be affected by avoidance quarantines, movement restrictions, and supply behavior are as follows: chain disruptions. Transaction costs are modeled as the traditional “iceberg effect,” where transport Labor market participation effect. Fear, controls, is treated as an exogenous friction that is fixed and and restrictions on the movements of workers are proportional to the value shipped, with the value likely to reduce household labor supply, at least added by transportation services treated as pure for the households that can afford to stop working. waste. A 5 percent increase is implemented. Ultimately, labor force participation would decline. 60 Rwanda Economic Update • Edition No. 16 Annex SAM accounts ACTIVITIES (A) & • Fruit and vegetable processing FACTORS COMMODITIES (C) • Fats and oils • Labor - rural uneducated • Maize milling • Maize • Labor - rural primary • Sorghum and millet milling • Sorghum and millet • Labor - rural secondary • Rice milling • Rice • Labor - rural tertiary • Wheat and barley milling • Wheat and barley • Labor - urban uneducated • Other grain milling • Other cereals • Labor - urban primary • Sugar refining • Pulses • Labor - urban secondary • Coffee processing • Groundnuts • Labor - urban tertiary • Tea processing • Other oilseeds • Land - agricultural crops • Other foods • Cassava • Capital - crops • Animal feed • Irish potatoes • Capital - livestock • Beverages • Sweet potatoes • Capital - mining • Other roots • Tobacco processing • Capital - other • Leafy vegetables • Cotton yarn   • Other vegetables • Textiles HOUSEHOLDS • Sugarcane • Clothing • Rural farm - quintile 1 • Tobacco • Leather and footwear • Rural farm - quintile 2 • Cotton and fibres • Wood products • Rural farm - quintile 3 • Nuts • Paper products and publishing • Rural farm - quintile 4 • Bananas and plantains • Petroleum products • Rural farm - quintile 5 • Other fruits • Fertilizers and herbicides • Rural nonfarm - quintile 1 • Leaf tea • Other chemicals • Rural nonfarm - quintile 2 • Coffee • Non-metal minerals • Rural nonfarm - quintile 3 • Cocoa • Metals and metal products • Rural nonfarm - quintile 4 • Cut flowers • Machinery and other equipment • Rural nonfarm - quintile 5 • Rubber • Electrical equipment • Urban - quintile 1 • Other crops • Vehicles and transport equipment • Urban - quintile 2 • Cattle • Other manufacturing • Urban - quintile 3 • Raw milk • Electricity, gas and steam • Urban - quintile 4 • Poultry • Water supply and sewage • Urban - quintile 5 • Eggs • Construction • Other accounts • Small ruminants • Wholesale and retail trade • Transaction costs • Other livestock • Transportation and storage • Enterprises • Forestry • Accommodation • Government • Aquaculture • Restaurants and food services • Taxes - activity • Capture fisheries • Information and communication • Taxes - direct • Coal and lignite • Finance and insurance • Taxes - export • Crude oil • Real estate activities • Taxes - factor • Natural gas • Business services • Taxes - import • Other mining • Public administration • Taxes - sales • Meat processing • Education • Savings-investment • Fish and seafood processing • Health and social work • Change in stocks • Dairy • Other services • Rest of world Rwanda Economic Update • Edition No. 16 61 Annex The impact of COVID-19 on domestic trade costs at the product-by-month level. We construct log price gaps between markets in Kigali and markets Abstract in rural districts, and between border markets and We estimate the changes in domestic trade costs non-border markets outside Kigali.50 These are associated with the COVID-19 shock in Rwanda. We constructed as the absolute deviation between the do so leveraging consumer price surveys collected average log price in Kigali (border markets) and the by MINAGRI and by World Bank’s DIME in partnership average log price outside Kigali (non-border markets with RTDA and RFRDP (P126498). Our results outside Kigali) for border price gaps and Kigali price suggest domestic trade costs for food were not gaps, respectively. meaningfully affected, but domestic trade costs for livestock may have risen, suggesting policies Results to reduce the impact of lockdowns on domestic First, we present estimates of Equation 1 in Table 1. agricultural trade were effective. Livestock prices are 6% lower in RFRDP MS post- COVID, but we do not find significant changes Data in prices in eSoko . We note that this difference This analysis relies on two data sources: the eSoko may reflect either lack of robustness of the result commodity price survey (eSoko) and the Rural Feeder or differences in the set of products covered by Roads Development Project Market Survey (RFRDP each survey. MS). Each of these surveys collects prices on a series of commodities across markets nationally at high Second, we present estimates of Equation 2 in Table frequency, and we leverage data from both surveys 2. We find relative food prices in border markets from July 2017 to May 2020.49 A detailed comparison were 4% lower in eSoko post-COVID, but we do not of these two data sources is made in the attached find significant changes in relative prices in RFRDP document “Market Price Data: Comparison to eSoko”, MS. We note that this difference may reflect either but some basic details are listed below. lack of robustness of the result or differences in the set of products covered by each survey. We also note The eSoko data is collected on a bi-weekly basis from that this result could be consistent with increased 62 markets across all 30 districts of Rwanda, with a trade costs associated with moving agricultural focus on large and strategic markets. eSoko collects price data on 48 agricultural products, 6 livestock production from border markets to Kigali, increase products, and charcoal. trade costs associated with cross-border trade, or decreased demand for agricultural production from The RFRDP MS data is collected on a monthly basis border markets. from 130 markets across 21 rural districts of Rwanda, with a focus on rural markets at the base of rural Third, we present estimates of Equation 3 in Table feeder roads targeted for rehabilitation. RFRDP MS 3. We find price gaps for livestock between border collects price data on 21 agricultural products, 8 markets and non-border markets in rural districts livestock products, and 35 other products. were 5-6% higher in both eSoko and RFRDP MS post-COVID. However, we find no change in price Outcomes gaps for food or for the full set of commodities. We log prices are observed at the product-by-month-by- propose two potential explanations of this result. market level. In addition, we construct log price gaps First, it is possible that domestic trade costs were There was a pause in eSoko data collection from July 2018 through April 2019. 49 We define border markets as markets located in a Cell within 10km of the Rwanda border. 50 62 Rwanda Economic Update • Edition No. 16 Annex unaffected for food post-COVID (an explicit objective Interpretation of post-COVID policy), increased for livestock, and Overall, we find limited evidence of large changes were not meaningfully affected for higher value per in domestic trade costs post-COVID. Our results are ton products. Second, it is possible that domestic consistent with an increase in domestic trade costs trade costs were unaffected post-COVID, but the for livestock (a 6pp increase in trade costs as a share contraction in demand for livestock products post- of traded value is one plausible interpretation of this COVID driven by the closure of restaurants had result) and no changes in domestic trade costs for particularly large effects on prices in border markets. food. However, they are also potentially consistent with no changes in domestic trade costs, but strong domestic demand and/or supply shocks. Table A2.1: COVID Trade log price (1) (2) (3) (4) (5) (6) post-COVID 0.020 0.013 0.015 -0.062 -0.075 -0.002 (0.011) (0.021) (0.011) (0.038) (0.026) (0.051) [0.084] [0.585] [0.157] [0.118] [0.022] [0.965] Product-by-year FE X X X X X X Product-by-calendar month FE X X X X X X Dataset eSoko eSoko eSoko RFRDP RFRDP RFRDP Product Food Livestock All Food Livestock All Number of markets 55 55 55 128 128 128 # of observations 46,578 5,164 52,724 76,494 21,906 220,809 # of clusters 48 6 55 21 8 64 Notes: Regression analysis is presented in this table. log price is observed at the product-month-market level. Each row presents coefficients, with robust standard errors clustered at the product level in parentheses, and p-values in brackets. “post-COVID” is an indicator for March 2020 or later, and data used for this analysis runs through May 2020. Rwanda Economic Update • Edition No. 16 63 Annex Table A2.2: COVID Trade log price (1) (2) (3) (4) (5) (6) post-COVID 0.030 0.012 0.026 -0.062 -0.083 -0.003 (0.013) (0.030) (0.012) (0.039) (0.030) (0.051) [0.027] [0.694] [0.033] [0.125] [0.028] [0.947] Border 0.034 0.039 0.037 0.006 0.036 0.006 (0.010) (0.042) (0.010) (0.009) (0.016) (0.007) [0.001] [0.405] [0.000] [0.559] [0.057] [0.333] Kigali 0.265 0.170 0.257 (0.023) (0.041) (0.021) [0.000] [0.009] [0.000] Border * post-COVID -0.039 0.003 -0.044 0.000 0.025 0.003 (0.013) (0.039) (0.015) (0.015) (0.020) (0.008) [0.004] [0.936] [0.005] [0.980] [0.247] [0.694] Kigali * post-COVID -0.024 -0.032 -0.021 (0.020) (0.043) (0.018) [0.222] [0.498] [0.260] Product-by-year FE X X X X X X Product-by-calendar month FE X X X X X X Dataset eSoko eSoko eSoko RFRDP RFRDP RFRDP Product Food Livestock All Food Livestock All # of markets 55 55 55 128 128 128 # of observations 46,578 5,164 52,724 76,494 21,906 220,809 # of clusters 48 6 55 21 8 64 Notes: Regression analysis is presented in this table. log price is observed at the product-month-market level. Each row presents coefficients, with robust standard errors clustered at the product level in parentheses, and p-values in brackets. “post-COVID” is an indicator for March 2020 or later, and data used for this analysis runs through May 2020. Table A2.3: COVID Trade log price gap (Border) log price gap (Kigali) (1) (2) (3) (4) (5) (6) (7) (8) (9) post-COVID 0.009 0.052 0.014 -0.012 0.062 0.015 0.006 -0.003 0.005 (0.021) (0.042) (0.018) (0.016) (0.022) (0.010) (0.017) (0.049) (0.016) [0.658] [0.268] [0.445] [0.489] [0.024] [0.137] [0.733] [0.955] [0.751] Product-by-year FE X X X X X X X X X Product-by-calendar month FE X X X X X X X X X Dataset eSoko eSoko eSoko RFRDP RFRDP RFRDP eSoko eSoko eSoko Product Food Livestock All Food Livestock All Food Livestock All # of markets # of observations 1,104 138 1,265 693 263 2,105 1,098 138 1,259 # of clusters 48 6 55 21 8 64 48 6 55 Notes: Regression analysis is presented in this table. Log price gaps are calculated at the product-month level. 64 Rwanda Economic Update • Edition No. 16 Annex ANNEX III: HEALTH SECTOR ANALYSIS Data on cases i. Reported cases by district, June 21 to October 18, 2020 District Province Total Share 1 Kigali City Kigali 3,130 59.8% 2 Rusizi West 611 11.7% 3 Kirehe East 263 5.0% 4 Rubavu West 250 4.8% 5 Nyamasheke West 156 3.0% 6 Nyamagabe South 116 2.2% 7 Muhanga South 106 2.0% 8 Ngoma East 99 1.9% 9 Nyagatare East 91 1.7% 10 Rwamagana East 83 1.6% 11 Musanze North 59 1.1% 12 Nyabihu West 48 0.9% 13 Bugesera East 43 0.8% 14 Karongi West 30 0.6% 15 Nyanza South 28 0.5% 16 Gisagara South 27 0.5% 17 Burera North 20 0.4% 18 Gatsibo East 19 0.4% 19 Huye South 16 0.3% 20 Rulindo North 8 0.2% 21 Kayonza East 8 0.2% 22 Gicumbi North 8 0.2% 23 Kamonyi South 5 0.1% 24 Rutsiro West 2 0.0% 25 Nyaruguru South 2 0.0% 26 Ruhango South - 0.0% 27 Gakenke North - 0.0% 28 Ngororero West - 0.0% 29 Unknown 4 0.1% GRAND TOTAL 5,232 100% Rwanda Economic Update • Edition No. 16 65 Annex Figures on cases by district Daily cases in Kigali, June 21 to November 30, 2020 250 3,500 3,000 200 2,500 150 2,000 1,500 100 1,000 50 500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 20 20 20 20 0 0 0 0 20 20 -2 -2 -2 2 2 -2 -2 -2 t-2 -2 -2 -2 -2 l-2 l-2 l-2 l-2 v- v- - - - g- g- n- n- ov ov ov ct ct ct ep ep ep p ug ug ug Oc -Ju -Ju -Ju Ju No No Se Au Au -Ju -Ju -O -O -O -N -N -N -S -S -S -A -A -A 5- 4- 26 19 12 6- 8- 1- 25 18 11 9- 2- 27 20 29 13 22 15 28 21 30 23 16 Daily cases 7-Day Moving Average Cumulative cases Daily Cases in Rusizi district, June 21 to November 30, 2020 35 800 30 700 600 25 500 20 400 15 300 10 200 5 100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 n-2 n-2 l -2 l -2 l -2 l -2 g-2 g-2 g-2 g-2 g-2 p-2 p-2 p-2 p-2 t-2 t-2 t-2 t-2 v-2 v-2 v-2 v-2 v-2 -Ju -Ju -Ju -Ju -Ju -Ju Au Au Au Au Au Se Se Se Se Oc -Oc - Oc - Oc No No No No No 21 28 5 12 19 26 2- 9- - - - 6- 13 - 20 - 27 - 4- 11 18 25 1- 8- - 22 - 29 - 16 23 30 15 Daily cases 7-Day Moving Average Cumulative cases Daily Cases in Rubavu district, June 21 to November 30, 2020 18 200 16 180 14 160 140 12 120 10 100 8 80 6 60 4 40 2 20 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 n-2 n-2 l-2 l-2 l-2 l-2 g-2 g-2 g-2 g-2 g-2 p-2 p-2 p-2 p-2 t-2 t-2 t-2 t-2 v-2 v-2 v-2 v-2 v-2 -Ju -Ju -Ju -Ju -Ju -Ju Au Au Au Au Au Se Se Se Se Oc -Oc - Oc - Oc No No No No No 21 28 5 12 19 26 2- 9- - - - 6- 13 - 20 - 27 - 4- 11 18 25 1- 8- - 22 - 29 - 16 23 30 15 Daily cases 7-Day Moving Average Cumulative cases 66 Rwanda Economic Update • Edition No. 16 Annex Daily Cases in Nyamasheke district, June 21 to November 2020 40 200 35 180 160 30 140 25 120 20 100 15 80 60 10 40 5 20 0 0 20 20 0 0 0 0 20 20 0 0 0 20 0 0 0 0 0 0 0 20 20 0 0 0 n- n- l-2 l-2 l-2 l-2 g- g- -2 -2 -2 p- -2 -2 -2 t-2 -2 -2 -2 v- v- -2 -2 -2 ug ug ug ep ep ep Oc ct ct ct ov ov ov -Ju -Ju 5- Ju -Ju -Ju -Ju Au Au -A -A -A Se -S -S -S -O -O -O No No -N -N -N 21 28 12 19 26 2- 9- 6- 13 20 27 4- 11 18 25 1- 8- 22 29 16 23 30 15 Daily cases 7-Day Moving Average Cumulative number COVID-19 Cases in Kirehe District, June 21 to November 30, 2020 40 200 35 180 160 30 140 25 120 20 100 15 80 60 10 40 5 20 0 0 20 20 0 0 0 0 20 0 20 20 0 0 20 20 0 0 0 0 0 0 0 0 0 20 0 0 0 0 l-2 l-2 l-2 l-2 l-2 -2 -2 -2 -2 -2 t-2 t-2 -2 -2 -2 -2 -2 -2 -2 -2 n- n- n- g- g- p- p- v- ug ug ep ep ep ct ct ct ct ov ov ov ov Ju Ju -Ju -Ju -Ju Oc Oc No -Ju -Ju -Ju Au Au Se Se -O -O -O -O -N -N -N -N -S -S -S -A -A 3- 9- 15 21 27 1- 7- 1- 7- 6- 2- 8- 13 19 25 31 21 27 21 13 19 25 12 18 24 30 14 20 Daily cases 7-Day Moving Average Cumulative number National COVID-19 plan • Create and raise public awareness for engagement on COVID-19 preparedness and The National COVID-19 Preparedness and Response response activities. Plan has six key objectives: • Improve logistics management for operational • Facilitate coordination of preparedness and support. response efforts and strengthen inter and intra- • Ensure enforcement of safety and security sectoral coordination, engagement and partner measures to facilitate implementation. participation. • Mobilize internal and external resources Development of the Rwanda COVID-19 plan was for an effective implementation of national guided by five principles: preparedness for COVID-19 prevention and • The prevention and control of COVID-19 is an control based on potential identified risks. international public good and requires strong • Enhance national capacities for prevention, political and financial commitments at national, promptly detection, and timely response to regional and international levels. potential COVID-19 cases. Rwanda Economic Update • Edition No. 16 67 Annex • In-country actions should build on existing • Electronic payments and online banking institutions and their mandates wherever services should be used whenever possible possible and draw on scientific evidence to rather than visiting banks or ATMs. refine the national plan and interventions. • All employees (public and private) shall work • A multi-disciplinary approach is needed to from home, except for those providing essential integrate technical, social, political, policy and services. regulatory issues to address COVID-19. • Borders are closed, except for goods and cargo, • Prevention and control interventions should be as well as returning Rwandan citizens and legal supported to ensure that the health and security residents, who will be subject to mandatory 14- of Rwandan citizens and foreigners living in day quarantine at designated locations. Rwanda are protected. • Travel between different cities and districts • Because the risk of COVID-19 will persist, there is of the country is not permitted, except for a need to strengthen national disease prevention medical reasons or essential services. Transport and emergency response capabilities. of food and essential goods will continue to function. In line with the World Health Organization (WHO) • Shops and markets are closed, except those guideline the budget includes six key pillars. selling food, medicine (pharmacies), hygiene Pillar Budget US$ Share and cleaning products, fuel, and other essential 1 Coordination and Leadership 451,293 1% items. 2 Epidemiological Surveillance 3,116,863 4% • Motos are not permitted to carry passengers 3 Laboratory 4,683,160 6% but may offer delivery services. Other public 4 Infection prevention and 60,692,136 83% transport within cities will only operate for control (IPC) and Case Management essential movements, as above, and with at least 5 Risk Communication and 1,146,420 2% one (1) meter distance between passengers. Community Engagement • All bars are closed. 6 Operational Support and 3,381,889 5% Logistics • Restaurants and cafes may only provide take- TOTAL 73,471,761 100% away service. Enhanced COVID-19 prevention measures imposed by the government on March 21 2020 • Unnecessary movements and visits outside the home are not permitted, except for essential services such as healthcare, food shopping, or banking, and for the personnel performing such services. 68 Rwanda Economic Update • Edition No. 16 Annex Descriptive trends and expected changes in selective non-COVID-19 services Rwanda Economic Update • Edition No. 16 69 Annex 70 Rwanda Economic Update • Edition No. 16 Annex Rwanda Economic Update • Edition No. 16 71 Annex Geographic variation in selective non-COVID-19 Services 72 Rwanda Economic Update • Edition No. 16 Annex Rwanda Economic Update • Edition No. 16 73 Annex Calculating the impact of lower coverage of to avoid overestimating the impact on stunting, only nutrition services 20 percent1 of the estimated number of additional stunting cases in 2020 were added to the total The Lives Saved Tool (LiST) was used to model how number of additional stunting cases in 2021. the intervention coverage changes affect stunting outcomes in 2020 and 2021. The effect of economic Mortality outcomes were converted into lost disruptions on increased wasting was estimated productivity by estimating the expected earnings based on Heady and Ruel (2020). Country-specific over adult working lives between 18 and 65 years regression coefficients are applied to projected of age. Excess cases of stunting were converted to changes in GDP growth, population projections, and expected earnings lost due to decreased cognitive baseline undernutrition estimates from LiST. development proposed by Hoddinott et al (2013), in which stunting was attributed with a 21 percent A human capital approach is used to estimate the reduction in future earnings. future productivity losses due to additional cases of stunting and wasting-related child deaths. These Projections of lost productivity accounted for GDP estimates are based on the methodology employed growth rate, the labor share of GDP, probability of in the Investment Framework for Nutrition (2018). death between age 5 and 19, and the percent of Separate estimates are produced for the additional lifetime earnings that can be realized (Hoddinott cases of stunting and additional mortality due to 2013). A 3 percent discount rate and 3 percent wasting. Excess burdens of child mortality and child annual GDP per capita growth rate was applied to all stunting were estimated for each scenario using estimates of future earnings. LiST for each year from 2020 to 2022. For mortality, annual estimates were aggregated to derive the * This represents approximate proportion of the 0-59-month-old cohort who would graduate from the model after 2020 and therefore not total expected impact over the three years. In order included in the total cases in 2021. 74 Rwanda Economic Update • Edition No. 16 Annex Results from Rwanda Joint External Evaluation (JEE) Metric (JEE Assessment Tool indicators) Score (1-5) P.1.1 Legislation, laws, regulations, administrative requirements, policies or other government instruments in 3 place are sufficient for implementation of IHR. P.1.2 The state can demonstrate that it has adjusted and aligned its domestic legislation, policies, and 3 administrative arrangements to enable compliance with the IHR (2005). P.2.1 A functional mechanism is established for the coordination and integration of relevant sectors in the 3 implementation of IHR P.3.1 Antimicrobial resistance (AMR) detection 1 P.3.2 Surveillance of infections caused by AMR pathogens 1 P.3.3 Healthcare associated infection (HCAI) prevention control programs 1 P.3.4 Antimicrobial stewardship activities 1 P.4.1 Surveillance systems in place for priority zoonotic diseases/pathogens 3 P.4.2 Veterinary or Animal Health Workforce 3 P.4.3 Mechanisms for responding to infectious zoonoses and potential zoonoses are established and functional 3 P.5.1 Mechanisms are established and functioning for detecting and responding to foodborne disease and food 3 contamination. P.6.1 Whole-of-government biosafety and biosecurity system is in place for human, animal, and agriculture 3 facilities P.6.2 Biosafety and biosecurity training practices 3 P.7.1 Vaccine coverage (measles) as part of national program 5 P.7.2 National vaccine access and delivery 5 D.1.1 Laboratory testing for detection of priority diseases 4 D.1.2 Specimen referral and transport system 3 D.1.3 Effective modern point of care and laboratory-based diagnostics 3 D.1.4 Laboratory Quality System 4 D.2.1 Indicator and event-based surveillance systems 4 D.2.2 Interoperable, interconnected, electronic real-time reporting system 2 D.2.3 Integration and analysis of surveillance data 4 D.2.4 Syndromic surveillance systems 4 D.3.1 System for efficient reporting to WHO, FAO and OIE 3 D.3.2 Reporting network and protocols in country 2 D.4.1 Human resources are available to implement IHR core capacity requirements 2 D.4.2 Applied epidemiology training program in place such as FETP 3 D.4.3 Workforce strategy 3 R.1.1 Multi-hazard national public health emergency preparedness and response plan is developed and 2 implemented R.1.2 Priority public health risks and resources are mapped and utilized 2 R.2.1 Capacity to Activate Emergency Operations 2 Rwanda Economic Update • Edition No. 16 75 Annex Metric (JEE Assessment Tool indicators) Score (1-5) R.2.2 Emergency Operations Centre Operating Procedures and Plan 3 R.2.3 Emergency Operations Program 4 R.2.4 Case management procedures are implemented for IHR relevant hazards 2 R.3.1 Public Health and Security Authorities, (e.g. Law Enforcement, Border Control, Customs) are linked during a 5 suspect or confirmed biological event R.4.1 System is in place for sending and receiving medical countermeasures during a public health emergency 2 R.4.2 System is in place for sending and receiving health personnel during a public health emergency 1 R.5.1 Risk Communication Systems (plans, mechanisms, etc.) 1 R.5.2 Internal and Partner Communication and Coordination 5 R.5.3 Public Communication 5 R.5.4 Communication Engagement with Affected Communities 4 R.5.5 Dynamic Listening and Rumour Management 4 PoE.1 Routine capacities are established at PoE 2 PoE.2 Effective Public Health Response at Points of Entry 1 CE.1 Mechanisms are established and functioning for detecting and responding to chemical events or 3 emergencies CE.2 Enabling environment is in place for management of chemical event 3 RE.1 Mechanisms are established and functioning for detecting and responding to radiological and nuclear 3 emergencies RE.2 Enabling environment is in place for management of Radiation Emergencies 3 Average score 2.9 Overall Performance (%) 58.0 76 Rwanda Economic Update • Edition No. 16 Annex Key Health Services Recommendations Key Area Main Recommendation Timing SUPPLY SIDE • Improve physical environment at health facilities to minimize risk of disease Medium- Term transmission, ensuring improved infection prevention and control measures, wide access to handwashing stations, and widespread availability of personal protection equipment for staff & community health workers. • Revamp the way services are organized and delivered by reducing the time for follow up visits, providing multiple months of medications to patients with chronic (hypertension, diabetes) and/or communicable diseases (HIV/AIDS, TB), increasing physical space between patients in waiting areas, and promoting better screening and triaging of patients. • Expand use of innovative technologies to minimize the need to visit facilities, such as mobile phone messaging, and telemedicine consultations. Notable examples include dissemination of information to protect essential infant and young child feeding practices (breastfeeding, complementary feeding); tele-triage patients to screen them for danger signs and risks; and mobile phone consultations to ensure patients remain adherent to treatment (e.g. hypertension, diabetes). • Strengthen community platforms for early detection and management of childhood illnesses and malnutrition while maintaining/expanding critical services (e.g., vitamin A supplementation for children, micronutrient and nutritional support for pregnant and lactating women), strengthening the supply chain for nutrition commodities to health facilities, and train/ protect community health workers during the pandemic. DEMAND SIDE • Leverage the national social protection program (VUP) to scale up income Short-term support and other social safety net measures for newly vulnerable households with young children and pregnant and lactating women, ensuring they have continued access to essential health services and nutritious diets, and lowering susceptibility to infections. • Address rising levels of food insecurity through targeted distribution of fortified blended food for the most vulnerable households, adopt appropriate policies that protect those involved in the food supply chain, and ensure markets continue to operate in a safe environment. • Expand access to the recently introduced emergency cash transfers targeted to newly vulnerable households affected by the containment measures, ensuring they have basic necessities in the short run and can bounce back from the shock in the medium to long run. MONITORING & • Enhance monitoring of essential health and nutrition services using digital Medium-term TRACKING tools. This would include providing key stakeholders with information on the status of essential health services across the country using real-time facility trackers. • Ensure robust and regular monitoring of the nutritional status of children and women through innovative tools to help identify quickly any vulnerability and provide appropriate services. Existing community structures such as the DPEM committees could play a role in ongoing community surveillance. • Improve health data reporting completeness and timeliness at public and faith- based health facilities. This will be key for monitoring the delivery of essential health and nutrition services, not only during COVID-19 pandemic, but also during normal periods. Without complete data, there is no way to estimate excess mortality or to identify geographic areas or beneficiary groups that are most affected. Rwanda Economic Update • Edition No. 16 77 Annex ANNEX IV: METHODOLOGY FOR CALCULATING IMPACT OF COVID-19 ON LEARNING Simulating the effect of COVID-19-related school Some of the main assumptions of this work are: closures on learning poverty requires simulating the • A focus on first-order effects of COVID-19-related effects on both learning and schooling deprivations. school closures in the crisis’s first 12 months. Given These simulations add three main contributions: the the definition of the indicator in terms of children focus on learning at the end of primary, the inclusion at the end of primary, the work does not look at of school enrollment effects due to the household cumulative effects at other grades. income shock, and the inclusion of a remediation • The expected learning gains, based on the literature effectiveness component. and empirical work, are 0.3 of a standard deviation. A parameterized Lorenz specification and income– • Dropout estimates used are based on October 2020 school enrollment elasticities are used to simulate growth projections and consider only children in the short-term effects of school closures, mitigation, primary (ages 4–11). The expected dropout rate of remediation responses, and economic contraction primary school age children is substantially smaller on the learning poverty headcount ratio, learning than that of secondary school age children (35% of poverty gap (population normalized and among the total Primary and Secondary drop out), given the poor), and learning poverty severity (population the greater income generating opportunities of normalized and among the poor). This procedure secondary school age children and far greater relies on simple summary statistics at the country supply constraints. The dropout estimates are only level (15 equally spaced bins with the average test affected by income shock and ignore the potential score in reading), computed using sample weights, effects of concerns about school safety concerns replication weights, and the assessment’s plausible and of school disengagement, which are likely to values. These data are then used to estimate the be relevant but are extremely hard to measure at Lorenz parameters. The Lorenz curve captures the this stage. If anything, these further effects have a pattern of relative learning inequalities in the student clear upward bias, so the out-of-school numbers population. It is independent of any considerations presented in the model can be seen as lower- of the absolute learning level. The share of students bound estimates. below a proficiency level captures an absolute standard of the student population. Scenarios All scenarios assume that, as of today, remote Two functional forms—the Beta Lorenz curve and learning cannot fully match face-to-face delivery. the General Quadratic (GQ) Lorenz curve—were In all scenarios, schools are closed for 70 percent tested for calculating the Lorenz curve parameters. of the school year. This set of simulations makes a For this exercise, the General Quadratic (GQ) Lorenz conservative assumption that learning distribution curve was preferred, since it provided better results does change. If those occur, the simulated learning in terms of both internal and external validation. This losses are likely to increase. exercise computes learners’ share below the end- of-primary minimum proficiency level (MPL), the In this specific simulation, three scenarios assume average learning gap with respect to the MPL, and different levels of mitigation and remediation the average learning gap severity for the same MPL. effectiveness. Mitigation is the level of effectiveness 78 Rwanda Economic Update • Edition No. 16 Annex of government responses while schools are closed, Intermediate. Remediation: approximately 30 2. considering two main parameters—what the percentage of the 70 percent school loss will be government is offering and the ability of households fully remediated. Mitigation: approximately 15 to take up what is on offer. The simulations use the percent of the school loss while schools are closed UNESCO-UNICEF-World Bank government supply will be fully mitigated. information and complementary household-level Pessimistic. Remediation: no remediation. 3. data on the availability of connectivity assets such as Mitigation: approximately 7 percent of the school radio, television, mobile phones, computers, and the loss while schools are closed will be fully mitigated. internet. Remediation reflects policies that might be implemented when schools reopen. Data The simulations use the same underlying data used Three scenarios are considered: to construct the original learning poverty measures. Optimistic. Remediation: approximately 60 1. Rwanda had at least one learning assessment at percent of the school loss will be fully remediated. the end of primary, carried out in the past eight Mitigation: approximately 30 percent of the years, that is of sufficient quality to be used for SDG school loss while schools are closed will be fully monitoring. mitigated. Rwanda Economic Update • Edition No. 16 79 Annex ANNEX V: USE OF MOBILE MONEY According to FinScope Financial Inclusion reports, rural areas (Figure 1). Only about a third of adults in the proportion of adults making use of mobile Ubudehe Category 1 and half of adults in Category money increased from about 40 percent to 60 2 use digital finance (Figure 2). The 2020 report also percent between 2016 and 2020.54 The increase in finds disparities between gender: 68 percent of adult mobile money use was broad-based, increasing men use mobile money compared to only 56 percent in urban and rural areas alike and across Ubudehe among adult women. Lack of knowledge of digital household categories. However, the proportion finance (48 percent of non-users) is what keeps of mobile money users is unequally distributed. people from opening a mobile money account, Although 90 percent of adults use mobile money according the report. in urban areas, only about half of all adults do so in Figure A5.1: Mobile Money Use by Location: Rwanda 2020 (In percent of adults) Urban Rural Use mobile money Do not use mobile money Use mobile money Do not use mobile money Source: FinScope Financial Inclusion Rwanda 2020 (Kigali: Access to Finance Rwanda). Estimates using FinScope 2020 data were kindly provided by Ephrem Rutagarama (Access to Finance Rwanda). Figure A5.2: Mobile Money Use by Ubudehe Category: Rwanda 2020 (In percent of adults) Category 1 Category 2 Use mobile money Do not use mobile money Use mobile money Do not use mobile money Source: FinScope Financial Inclusion Rwanda 2020 (Kigali: Access to Finance Rwanda). Estimates using FinScope 2020 data were kindly provided by Ephrem Rutagarama (Access to Finance Rwanda). 80 Rwanda Economic Update • Edition No. 16 Annex ANNEX VI: METHODOLOGY FOR POVERTY ESTIMATIONS AND SOCIAL PROTECTION SIMULATIONS Summary To reflect current economic conditions and the economic effects of the COVID-19 pandemic, the The simulations are based on household survey data adjusted for (a) growth pre-COVID-19; and dataset has been updated with the result from the (b) the impact of COVID-19. The team used the CGE modelling. In the absence of representative latest available representative household survey of survey data that captures the effects of the Rwanda and updated the consumption aggregates in COVID-19 pandemic on Rwanda’s economy and this survey using the results of the CGE model. These living standards, the team relied instead on using consumption aggregates are used to develop the results of the CGE modelling to update the 2016 poverty impact of COVID-19 under various scenarios. household data to reflect the living conditions in 2020. This process developed a “business as The team conducted microsimulations of the usual” consumption aggregate for 2020 and 2021, government’s social protection response. From reflecting the no-COVID-19 scenario. Then the the updated consumption aggregates, the team model develops consumption aggregates for 2020 used microsimulation methodology to recreate the and 2021 for each of the three scenarios modelled main emergency social protection measure in the in the CGE: (a) baseline; (b) pessimistic; and (c) household survey. These results were then used to optimistic. Specifically, the CGE modelling resulted estimate the poverty mitigation impact of the social in a consumption shock for households that protection measures. differed by quintile, household location (urban/ Data rural) and sector (agricultural / not agriculture). For example, the baseline scenario resulted in an 8% The simulations use data from the 2016/2017 reduction of consumption in the third quintile of Integrated Household Living Conditions Survey rural agricultural households. The updated results (EICV). The data is nationally representative and are therefore a best guess of the current situation includes 14,580 households (63,439 individuals) selected through two-stage stratified random sampling. in Rwanda and the changes in poverty and income/ consumption distribution. The dataset has information on: The survey was also updated to reflect the social • Household members' demographic characteristics protection system expansion between 2016 and (gender, age, health, education, labor market 2020. Between 2016 and early 2020, coverage status) of social protection programs in Rwanda has • Income of all household members from work and increased significantly. Notably, coverage of the other sources flagship VUP program’s public works and direct • Access to services and responses to shocks support components has increased by 70,000 and • Housing situation and dwelling characteristics 50,000 households, respectively. The expansion • Possession and sale of durable goods, land, of these benefits was simulated in the survey to livestock, and farm assets accurately reflect the state of social protection • Household-related businesses before the pandemic. • Daily recording of consumption expenditures Rwanda Economic Update • Edition No. 16 81 Annex Methodology districts bordering the DRC, and (iii) a transfer for agricultural households. The transfers have The main objective of the simulations is to gauge the reached a combined 35,000 households as of impact of the GoR’s social protection COVID response September 2020. measures as outlined in the Economic Recovery Plan and subsequent government documents. Based on • Expansion of ePW and cPW coverage: The the updated household consumption and income government has expanded coverage of the distribution resulting from the CGE simulations, the existing public works programs. While the government’s economic response measures are recovery plan foresaw an expansion of ePW assessed using microsimulation on the updated from 40,454 to 75,000 and of cPW from 157,852 EICV 2016/2017 dataset. The simulations measure to 191,39 households, administrative data the effectiveness of the government’s measures indicates that only a much smaller expansion of in mitigating the COVID shock and preventing about 4,000 additional households took place households from falling into poverty. between March and September 2020. Existing beneficiary households also continue to be paid. The following measures are simulated: • Expansion of VUP direct support: The • Emergency cash transfers: The government has government expanded coverage of the direct announced providing three different types of support and nutrition sensitive direct-support emergency cash transfers to households: (i) a cash benefits. The expansion of direct support transfer targeted at informal sector households has reached about 119,025 households as of in Kigali who live in overcrowded housing, September 2020; and the expansion of NSDS (ii) a transfer for cross-border traders in the reached 84,599. Pillar Budget US$ Share Emergency cash Beneficiary numbers Three sets of transfers: transfers according to government (i) Cash transfer to informal sector. This benefit is allocated using randomization databases and data from among households in Kigali in Ubudehe 1 and 2 categories who live in GiveDirectly. overcrowded housing. Overcrowded housing is proxied through the number of rooms per capita in the household dwelling. (ii) Cash transfer to traders in cross-border districts. The benefit is allocated through randomization among informal sector households in cross-border districts in Ubudehe 1 and 2 categories. (iii) Cash benefit to agricultural households. This benefit is allocated using randomization among households in rural areas whose head works in agriculture. The benefit is restricted to households in Ubudehe categories 1 and 2. Expansion of public Numbers as per The benefit is allocated by randomizing among Ubudehe 1,2,&3 households works (cPW, ePW, economic recovery using propensity score matching to identify households that have similar IMHO) document and characteristics to existing beneficiaries (of VUP cPW, as identified in the survey) government databases. and increase their probability of receiving the benefit. The variables used for the propensity score matching are the variables used for the welfare scoring card, as well as household consumption and income. Expansion of VUP Numbers as per The benefit is allocated by randomizing among households using propensity direct support and economic recovery score matching to identify households that have similar characteristics to existing NSDS document and beneficiaries (of DC, as identified in the survey) and increase their probability of government databases. receiving the benefit. The variables used for the propensity score matching are the variables used for the welfare scoring card, as well as household consumption and income. Direct support is allocated only to Ubudehe category 1 households whereas nutrition-sensitive direct support is allocated to Ubudehe 1 & 2 households with children under the age of 2. 82 Rwanda Economic Update • Edition No. 16