Surging Investment and Declining Aid: Evaluating Debt Sustainability in Rwanda

Uses a model of public investment, growth, and debt sustainability to evaluate the consequences of a scaling-down of investment

• From: Department for International Development
• Published: 31 March 2014

• Country: Rwanda
• Document Type: Working Paper
• Theme: Economic Growth
• Authors: Clark JR, John W., Arnason, B

Abstract

Rwanda is a unique case among its Sub-Saharan African peers in that it has already undergone a large scaling-up of public investment. The Rwandan government has made clear its desire to lower its reliance on foreign aid while still maintaining high public investment levels. The authors use the model of public investment, growth, and debt sustainability in Buffie et al. (2012) to evaluate the macroeconomic consequences of a possible scaling-down of investment in Rwanda. Using the model, they can gauge the consequences of different financing mechanisms and investment efficiency levels on the economy. They find that with some commercial borrowing and a modest tax adjustment, the authorities may be able to retain their high investment spending while still reducing their reliance on foreign aid.

This work is part of the ‘Macroeconomics in Low-income countries’ programme

Citation

John W Clark JR, Birgir Arnason (2014) Surging Investment and Declining Aid : Evaluating Debt Sustainability in Rwanda. IMF Working Paper No. 14/51

Links

Surging Investment and Declining Aid : Evaluating Debt Sustainability in Rwanda

Published 31 March 2014