Rwanda - Agricultural Research Project

Do fument or The World Bank FOR OmCIAL USE ONLY Repsit Nob P-3927-RW REPORT AND RECOMMNENDAIION OFTHE - PRESIDENT OF THE INTERTATIONtAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO U'S1I1.5 MILLION TO THE RWANDESE REPUBLIC FOR AN AGRICULTURAL RESEARCH PROJECT January 22, 1985 tlfir oidd d_tm lftlsm may not ollwie be diwlsed - eddBkatorit iol w.  CURRENCY EQUIVALENTS (since September 1983) US$1.00 - Bwandese franc (RvF) 97.00 RuF 100 - US$1.03 FISCAL YEAR Gc werument: January 1 - December 31 ISAR: January 1 - December 31 GLOSSARY OF ABBREVIATIONS CERAI - Centres d'Enseignement Rural et Artisanal Int6grf (In.e- grated Rural and Crafts Development Teaching Centers) CGIAR - Consultative Group for International Agricaltural. Research CIAT - International Center for Tropical Agriculture CI2MYT - International Maize and Wheat Improvement Center CIP - International Pbtato Center EDF (FED) - European Development Fund FAC - Fonds d'Aide et de Cooperation FAO - Food and Agriculture Organization (United Nations) FSIP - Farming Systems Improvement Project GERDAT - Groupement d 'Etudes et de Recherche pour le Developpement de 1'Agronomie Tropicale (Study and Research Group for the Development of Tropical Agronomy) IARCs - International Agricultural Research Centers ICRAF - International Council for Research in Agro-forestry IDRC - Int"rnational Development Research Center IFAD - International Fund for Agricultural Development IFCC - Institut Frangais du Cafe et du Cacao (French Coffee and Cocoa Institute) IITA - International Institute for Tropical Agriculture ILCA - International livestock Center for Africa INEAC - Institut National pour 1'Etude Agronomique du Congo Belge (National Institute for Agronomy of the Belgian Congo) ISAR - Institut des Sciences Agronomiques du Rwanda (Agricultural Research Institute of Rwanda) ISNAR - International Service for National Agricultural Research MINAGRI - Ministry of Agriculture, Livestock and Forestry PAR - Projet Agricole de Kibuye PNTAP - Programme National pour 1'Amelioration de la Pomme de Terre (National Program for Potato Improvement) SSS - Selected Seed Service UNR - National University of Rwanda USAID - United States Agency for International Development i WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (i) = 3.3 feet I hectare = 2.47 acres I are (100 m2) 0.02 acre 1 kilometer (km) 0.62 mile 1 are (100 m2) 0.01 hectare I square kilometer (km2) = 0.39 square miles (sq. mi.) 1 kilogram (kg) 2.2 pounds (lb) 1 liter (1) 0.26 US gallons (gal) 1 metric ton (m ton) 2,204 pounds (lb)  FOR OMFICLAL USE ONLY RWANDA AGRICULTURAL RESEARCH PROJECr Credit and Project Summary Borrower: Rwandese Republic Amouat: SDR 11.7 million (US$ 11.5 million equivalent) * Terms: Standard IDA terms Beneficiary: Ministry of Agriculture, ISAR (Agriculture Research Institute of Rwanda) Project Description: (i) Objectives and Content: The Project would constitute a first phase of a long-term support program to strengthen the national agricultural research in Rwanda, and to make agricultural research activities more responsive and applicable to the needs and constraints of the producers. The Project would consist in: the development of a long- term master plan for agricultural research, including a national seed multiplication and distribution policy and a long-term anpower development plan; support of on-going research programs; institutional development of ISAR (Rwanda's national research organization) through rein- forcement and reorganization of research efforts, the expansion of farming systems and on-farm research, better linkages between research and extension activities, and the improvement of research management; development, reha- bilization and equipping of research station facilities and other essential agricultural and laboratory equipment; provision of a soils map of Rwanda; and support to the Agriculture Faculty and to the Department of Geography of the University of Rnanda to increase the research capabilities of studerts and faculty. (ii) Benefits: Benefits would include strengthening of Rwanda's agricultural research efforts, which in turn are a prerequisite for sustained agricultural development. By strengthening individual research programs and setting them in the context of a longer-tern master plan, the pro- ject would assist in directing research to priority areas, adapring it to Rwanda's needs, and coordinating external assistance amongst all donors funding agricultural re- search in Rwanda. This document has a rcstricted distribution and may be used by recipients only in the performance of their official dutes Its contents may not otherwos bc discosed without World Bank authorization  - ii - (iii) Risks: Delays in upgrading research staff and/or their recruitment could slow down the Project's execution. Incomplete development of linkages between research and extension could delay diffusion of newly generated technologies and their impact at farm level. Estimated Project Costs: 1/ Local Foreign Total (US$ million equivalent) Capital Costs 2.1 3.6 5.7 Researen Staff Expenditure 1.1 1.1 2.2 Operating Costs 3.8 2.5 6.3 Base Cost 7.0 7.2 14.2 Physical Contingencies 0.4 0.4 0.8 Price Contingencies 1.9 1.1 3.0 Total Project Costs 9.3 8.7 18.02/ _~~ _ Financing Plan: Local Foreign Total (US$ million equivalent) Government 5.1 0.2 5.3 ISAR 0.6 0.6 1.2 IDA 3.6 7.9 11.5 TOTAL 9.3 8.7 18.0 _ _- Estmared Disbursements: IDA Fiscal Years FY85 FY86 FY87 FY88 FY89 FY90 US$ Millions Annual 1.2 2.0 2.3 2.7 2.4 0.9 Cumulative 1.2 3.2 5.5 8.2 10.6 11.5 Appraisal Report: No. 5181-RW of January 10, 1985 Rate of Return: Not applicable Map: IBRD 18308 1/ Import duties would not be levied on the pro4ect; base costs are at January 1984 prices and include 5 percent taxes on civil works, locally procured equipment and operating costs (US$0.4 million). 21 Including an advance of US$687,000 from the Project Preparation Facility.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AI-' RECOK4ENDATION OF THE PRESIDENT TO THE EYW UTIVE DIRECTORS ON A PROPOSED CRE:T TO THE RIANDESE REPUBLIC FOR AN AGRICULTURAL RESEARCH PROJECT 1. *I submit the following report and recommendation on a proposed development credit to the Rwandesc Republic for the equivalent of SDRs 11.7 million (US$11.5 million) on s.andard IDA terms, to help -finnce a First Agricultural Research Project. PART I - THE ECONOMY if 2. A Country Economic Memorandum (Report No. 4059-RI) was distributed to the Executive Directors on May 20, 1983 which discussed economic developments in Rwanda until that date. These developments, updated when possible, are suumar!zed below. Country data are provided in Annex I. 3. Rwanda is a small landlocked country, surrounded by Uganda, Tanzania, Burundi and Zaire. It has the third highest population density of low income countries, at 210 persons/km2 (following Bangladesh and Sri Lanka), and its GNP per capita is among the lowest in the world, estimated at about US$240 in 1982. Rwanda's population of 5.5 million in 1982 is predominantly rural (with only 4.5 percent in urban areas), and lives in small individual farms scattered over hilly terrain. The balance between food production and population is precarious, as potentially arable land is scarce, yields of most fooderops have been stagnan;, and population is expanding at an estimated 3.6 percent annually. Twice recently (1974 and 1980), Rwanda had to resort to emergency food imports. Agricultural exports (coffee, tea, pyretbrum, cinchona) provide most of the country's foreign exchange earnings. Coffee is by far the most important source (56 percent) followed by mining products (16 percent), mainly cassiterite and wolfram. Rwanda's manufacturing base Is narrow, and growth of modern manufacturing is limited by the small size of the market and by the lack of raw materials, marketing facilities, entrepreneurial skills and skilled * manpower. The country, consequently, imports capital goods, steel, petroleum products, cement and other construction materials, and virtually every modern consumer product. Its merchandise trade is hampered by high transportation costs and dependence on neighboring countries for access to t the seaports at Mombasa and Dar es Salaam. 4. A quantitative assessment of Rwanda's economic performance can only be tentative, as the national accounts estimates are based upon data 1/ Par. I of this report is substantially the same as that in Report No. P-3822-RW on the Power Project considered by the Executive Directors on June 12, 1984.  - 2 - of dubious reliability. These estimates suggest that during the period 1977-82 the rate of growth of real GDP averaged about 5 percent per annum, on the strength of reasonably good performance by most sectors, except those engaged in production for export. The recent growth of the agricultural sector can be explained, to a significant extent, by good weather conditions, increased world coffee prices In the late 1970s, improvement of the road network, and the rapid growth of urban and project-induced demand. Official production data indicate that foodcrop output (about 36 percent of GDP) increased at an average annual rate of about 5 percent In the period 1977-82, but this estimate may prove to be overstated. In any even;, it is the judgment of informed observers that the balance between food production and popula.ion remains precarious, as food production is vulnerable to weather conditions and population is increasing rapidly. With the exception of tea, the production of export crops was disappointing during 1978-82. Largely influenced by weather, and In spite of substantial increases in 1978 and 1981, coffee production tended to stagnate. Absolute declines were recorded for .he country's two other expor. crops, pyrechrum and cinchona. After having expanded at an average rate of 11 percent per annum, tea production also declined in 1982 (due to competition from other crops and lack of fertilizers), and the industry has experienced difficulties in obtaining sufficient quantities of green leaves to process for export. 5. Mining production also declined during 1977-82, at an average annual raze of 4 percent. This poor performance has been a consequence of various factors, among them management problems at SOMIRWA (the mining company), equipment obsolescence, and substantial increases in production costs (mainly the wage bill) while world market prices have fallen and the Rwandese franc (linked until September 1983 to the United States dollar) had appreciazed vis-a-vis the country's major trading partners (para. 11). 6. Manufacturing growth was, on average, 5 percent during 1977-82, largely reflecting agricultural performance as an estimated three-quarters of manufacturing output consists of the transformation of agricultural pro- ducta, mainly banana and sorghum, into beer, and agro-industries (coffee, tea, sugar). Modern manufacturing has been limited to import substitution industries such as shoes, textiles, soap, plastic utensils, corrugated iron sheets, all of which rely on imported raw materials. A cement plant located in Cyangugu (southwest Rwanda) is due to start operations next year and is expected to make Rwanda self-sufficient in cement. 7. Tertiary sector activities experienced a fairly rapid expansion during 1977-82. Commerce and transportation increased at an average annual rate of 6 percent reflecting increases in marketed foodcrop production, manufacturing output, and imports (especially of consumer and intermediate goods). Traffic on Rwandese roads is estimated to have expanded at about 7 percent per annum, the fleet of pick-ups doubled during 1979-82, and imports of transport equipment increased at nearly 9 percent in real terms, albeit all from a very small base. 8. Tradicionally, the Government has pursued prudent fiscal policies. A principal indicator of this was the budget surpluses incurred during  - 3 - 1977-81 (on average, 2.5 percen, ot GDP). The GoveramenCs ability to sustain these surpluses was aided by favorable terms of trade, which served to raise export duties (particularly in 1977-79, following .he rise In coffee prices) and import duties (insofar as Rwanda's exports financed a relatively large volume of imports, upon which the revenue structure Is highly dependent). Also, substantial capital Inflows facilitated thle growth in imports, thereby adding to government revenues. In 1977-81, nearly 50 percent of central government revenues 'which averaged 10 percent of GDP) came from import and export taxes, with coffee exports alone con- tributing 21 percent; taxes on beverages, and on income and property accounted for most of the remainder. Expenditures w.ere distributed mainly among administrative services (25 percent), education (26 percent), and defense (20 percent). Expenditures on agriculture and public works have expanded faster than total expenditures In recent years. 9. The fiscal situation, however, has deteriorated since 1981. In contras; to the preceding years, increases in revenue have fallen short of inc-reases in expenditure. Budgetary receipts from coffee export duties have stagna;ed a. lower levels than .hose of previous years as a result of declining coffee prices and in spite of higher export volumes. At the same time, there has been a significant expansion in government expenditures reflecting, inter alia, the impact of the general wage increase granted in September 1980, the addition of a new Ministry of Higher Education, and implementation of the 1979 education reform. In an effort to expand the revenue base and increase revenue, the Government introduced a new business tax in 1981 which, however, has not. yielded sufficient revenues co compensate for the decline in revenue from coffee. As a result of these developments, the overall budgetary balance has shifted from a surplus of RwF 1.0 billion in 1980 (equivalent to 1 percent of GDP) to deficits of RwF 2.2 billion and RwF 3.0 billion in 1981 and 1982, respectively. In an attempt to arrest the fiscal deterioration, the Government increased import tariffs in January 1982 and taxes on beer and cigarettes, in January 1983. 10. The Government has been traditionally conservative in its monetary and crediz policies. Inflationary pressures have arisen mainly from supply shortages caused by frequent disruptions of supply routes through neigh- boring countries, increased international transport costs, and increased prices of imports and domestic foodstuffs. Inflation averaged 10.6 percent per annum during 1977-82; it peaked at 15.8 percent in 1979, primarily as a result of the closing of the Uganda border, but also reflecting higher transport costs following the 1979-80 oil price rise. In 1983, inflation was down to 6.5 percent, as trade flows through Uganda were normal and the rate of increase of import prices decelerated. 11. Rwanda's increased export earnings (until 1980) and large inflows of foreign grants and loans enabled the country, during 1977-81, to in- crease imports substantially and to build up international reserves. In real terms, imports of goods and non-fac;or services expanded at an average annual rate of 5 percent and averaged 27 percent of GDP. At the same time, Rwanda's gross international reserves reached, at end-1981, an amount equi- valent to nearly seven months of estimated 1982 imports of goods and non- factor services. Since 1982, however, Rwanda has been suffering reserve  losses as coffee export receipts have remained at about the sam (de- pressed) levels of 1980-81, foreign grants and loans have declined, while imports have continued to expand rapidly. In an attempt to arrest the deterioration of the balance of payments and minimize the future impact of exchange rate variability among the major currencies on t.re external current account, the Government delinked the Rwandese franc from the United States dollar in September, 1983 and pegged it instead to the SDR, at the rate of RwF 102.71 = 1 SDR. This was equivalent to a devaluation of the Rwandese franc vis-3-vis the United States dollar of 5-6 percent. Such a measure should contribute to stemming the loss in reserves which by October, 1983, were down to the equivalent of four months of projected 1984 imports of goods and non-factor services. 12. Rwanda's Third Development Plan, like its predecessor, remains essentially a qualitative document which provides a broad statement of national development priorities?/ but lacks a multi-year sectoral invest- ment program, key Input and output targets (in physical as well as finan- cial terms), and an agenda of policy and lnstitutional reforms for imple- menting the overall strategy. Other important weaknesses of the planning process are: the absence cf a mechanism for periodically assessing the changing outlook regarding resource availabilities and the feasibility of the projected levels of investment and the weak linkage between the planning and budgetary processes. In consequence of these deficiencies, Rwanda's plans have not served as effective instruments of economic manage- ment. Nevertheless, the Government has made serious efforts to pursue the Plan's objectives. The limited success of these efforts bas been largely due to the country's structural constraints (among them the critical popu- lation problem), Institutional weaknesses (stemming largely from lack of skilled personnel), and insufficiency of domestic financial resources. At the same time, the lack of skilled personnel, fragmentation of institu- tional responsibilities, and poor coordination among concerned agencies have limi.ed the country's capacity to absorb external resources. 13. The Government has taken steps to address these problems. Of par- zicular importance have been actions concerned with the extremely rapid population growth, and the lack of education and training. In 1980 it established the National Population Office (ONAPO) to plan, coordinate, and monitor all population activities. ONAPO has started to sensitize the population about the implications of excessive demographic pressure on the country's limited resources, a few pilot family planning programs have been set up, and a nationwide fertility survey, now completed, is expected to j provide valuable information on the potential demand for family planning. Obviously, the impact of these measures will be felt only in the long-run. Meanwhile, the population, growing at 3.6 percent annually, is expected to double by the year 2000. To address the problem of lack of education and training, the Government introduced an education reform in 1979 whose 2/ As in the Second Plan, five of the six main goals of the Third Plan re- late to the satisfaction of basic needs: (i) food self-sufficiency; Cii) job creation, to ensure an adequate family income; (iii) education and training; (iv) improvement of basic health services; and (v) provision of minimum standard housing.  objectives are appropriate to the country's needs, but whose implementation has been hampered by financial constraints and the lack of teachers. In order to facilitate more coherent economic management, the Government was reorganized on January 6, 1984. The reorganization included combining the M(inistry of the Economy and Commerce with the Ministry of Finance. * 14. As mentioned earlier, external aid (of US$25-30 per capita) was an important catalyst to the country's favorable economic performance d'tring 1977-81. This aid has been mainly for infrastructure and technical assistance, most of which (58 percent) has benefitted agriculture, educa- tion, and health care. These three sectors, together with transport and communlcations, received nearly 65 percent of the aid extended to Rwanda In 1982, an emphasis which is in line with the country's objectives and prio- rities. The principal sources of foreign assistance and their average share during 1977-82 were Belgium (27 percent), the European Development Fund (14 percent), the Federal Republic of Germany (8 percent), IDA (7 per- cent), and France (6 percent). Rwanda has carried out Article IV consulta- tions with the IMF regularly, but it has not requested IMF financial assistance. 15. Economic management in recent years has been prudent, as evidenced by relatively low inflation rates, low debt service ratio, and avoidance of projects of dubious economic justification. This was undoubtedly faci- litated by substantial aid inflows and favorable terms of trade in the early part of the period. The terms of trade have deteriorated since 1980 and are projected to continue to deteriorate during the '80s. It is thus evident that the country's need for external assistance will increase sub- stantially. Its external debt is still manageable. At end-1982, the medium- and long-term external debt outstanding (disbursed only) amounted to US$189.3 million equivalent, or 13 percent of GDP, and the debt service racio was equivalent Lo only 2.8 percent of exports of goods and non-factor services. Hence, there remains scope for further borrowing. However, given the poverty of the country, Its overwhelming constraints and vulnera- bility, and its unfavorable medium-term prospects, external funds should continue to be provided in the form of grants or loans at highly conces- sionary terms, and include a high proportion of local cost financing and non-project assistance. PART II - BANK GROUP OPERATIONS IN RWANDA 3/ 16. Bank Group assistance started in 1970 and initially focused on the improvement of the road network and the strengthening of agriculture production. Rwanda has received twenty-one IDA credits totalling US$217 million, of which five (totalling US$69.0 million) were for roads, seven (US$80.9 milllon) for agriculture (para. 29), three (US$16.2 million) for DFC projects, two (US$18.0 million reduced to US$16.4 million) for educa- 3/ Part II of this report is substantially the same as that in Report No. P-3822-RW on the Power Project, considered by the Executive Directors on June 12, 1984.  - 6 - tion, one (US$7.5 million) for telecommunications, one (US$5.0 million) for technical assistance, one (US$13.0 million) for water supplv, and one (US$9.0 million) for power. There have been no Bank loans. An IFC loan of US$535,000 for a tea factory was signed in 1976; a second IFC loan of US$226,000 and contingent equity commitment of up to US$60,000 to expand the tea factory were signed in Septetiber 1980. Annex tI contains a summary statement of TDA credits and IFC investments as of September 30, 1984. 17. A US$13.0 million credit for a Water Supply Project (1345-RW) became effective February 14, 1984. The project Is on schedule and bidding activities have proceeded smoothly. A US$15.0 million credit, which represents Rwanda's share of the Ruzizi II regional hydroelectric project benefitting Burundi, Rwanda and Zaire, was signed on April 4, 1984. A US$9.0 million credit for a power project was signed on August 10, 1984. 18. In fiscal years 1982-84, disbursements for Rwanda totalled US$49.1 million compared to new commitments of US$86.2 million. In the same period, zhe average annual disbursement rate (ratio of change In dis- bursements to undisbursed balance) was 19 percent; this is about average for countries of the Eastern Africa Region. 19. One of the major constraints to Rwanda's development is the shortage of technical/managerial capacity. This affects all sectors and Inhibits project preparation and implementation. Intensive technical assistance and on-the-job tralning of Rwandese staff are therefore a salient feature of the Bank's program for Rwanda, either under individual projects in the various sectors or through the Technical Assistance Project (Credit 1214-RW declared effective November 22, 1982) which is promoting inter-ministerial coordination in project preparation and monitoring, and aims at strengthening the Minlstry of Planning. A second technical assistance project is envisaged to promote better coordination in economic policy-making and to help strengthen in particular the recently reorganized Ministry of Finance and Economy. 20. The primary emphasis of Bank Group operations will remain on agriculture and rural development, the main objeczive being to increase food production as well as export crops, while maintaining soil fertility. A major emphasis will also be placed on the development of human resources, focusing on population planning and support to basic education and skills training to improve agricultural productivity, provide skilled manpower, and influence attitudes on ;he population Issue. Further investment Is also justified for infrastructure and, in particular, for roads to reduce the country's Isolation and provide Incentives to further intensification of agriculture as well as increased specialization and diversification through better marke;ing. Another area requiring our special attention is energy to lessen the demand for fuel imports and mitigate their impact on the balance of payments.  PART III - THE RURAL SECTOR 21. General. Rwanda Is hilly to mountainous with elevation and rain- fall increasing from east and west. The country Is characterized by a wide diversity in agro-ecological situations and corresponding farming 10 systems. The western part (Lake Kivu), the central high plateau and the northern volcanic highland areas have the highest agricultural potential, and also the highest population density (300 to 600 inhabitants per square 4 kilometer of usable land). The semi-arid eastern savannah, traditionally a * grazing area sparsely populated, is increasingly being settled as a result of the recent control of the tsetse fly and mounting population pressures elsewhere In the country. About half the total area is currently exploitable for agricultural purposes. Of this, 50 percent is planted in foodcrops: beans, sweet potatoes, cassava, beer, banana and sorghum (and more recently, potatoes, maize and peas). About 5 percent is under export or industrial crop cultivation - mainly coffee, but also tea - and approxi- mately 40 percent .s used as pasture land, wood lots and fallow. Rapidly growing population pressure (para. 3) has resulted in an expansion of the area under cultivation at the expense of forested areas, grazing lands and the prac;ice of fallow. Declining land availability has forced intensi- fication of agriculture through double cropping. Productivity per hectare has been falling as a result of Increased cultivation of marginal lands and decreasing soil fertility due to intensification and erosion In some fragile areas. Population pressure has also led to a diminishing average farm size, with more than half of all farm families occupying less than 1 hectare. Average rural family income is equivalent to ahout US$550 (about US$70 per capita). 22. Agriculture in the Economy. The agricultural sector Is the most important contributor to the national ecenomy. Its share of GDP at current prices has averaged about 46 percent over the last five years, with sub- sistence agriculture accounting for an ewtimated 80 percent of this. In 1981, agricultural products represented 79 percent of the total value of exports, with coffee alone accounting for 60 percent and tea for another 10 percent. 23. Up to the present, foodcrop production appears to have kept pace with population growth, roughly maintaining national food self- sufficiency. Nevertheless, some dependence has been developing on imports of certain types of food products (wheat, rice, salt and oils). Food imports, exclusive of food aid, averaged about 9 percent of total recorded imports during 1977-80. Food aid, contributed mainly by ;he TJnited States Agency for International Development (USAID), the EEC and the World Food Program (UNDP), was estimated at about 7,000 tons in 1980 and 11,000 tons in 1982 (essentially grain flour, oil and powdered milk). 24. As noted in para. 4, agricultural output expanded at 5 percent per annum during the period 1977-82. This rate of growth, however, is no longer sustainable. The economy is facing a period of unprecedented con- straints, both physical and technical at the farm level and financial and institutional at the national (governmental) level. There is not much  - B - scope for expansion of cultivated area In the future, and therefore increases in production must come essentially from intensification of production at the farm level. On the national level, the current market forecast for Rwanda's major export crops is not favorable, and economic recession in the principal donor countries has resulted in aid cutbacks and uncertainty in the level of future concessionary aid. 25. Production Trends. During the last ten years, foodcrop produc- tion Increased by about 50 percent, with growth coming mainly from an expansion ln the area under cultivation of about 40 percent. Over that period, and except for sweet potatoes, yields of most foodcrops have remained stable or have decreased. Because of population growth and limited land availability, cattle herd size is declining and there are indications of gradual replacement of cattle by small ruminants, pigs and chickens. The country's natural forest resources are endangered by growing pressure for cropping land and by lack of adequate protection. Natural forest reserves cover 6.5 percent of ;he total land and are estimated to be declining a; a rate of 5 percent per annum. Reforestation is actively being promoted by the Government. 26. Although export crops contribute only about 5 percent of GDP and occupy less than 5 percent of the total cultivated area, they constitute the major source of foreign exchange earnings for the country. The area under export crops increased by 45 percent from 1970 to 1980. Coffee represents 75 percent of the area under cultivation for export crops, and it is now spreading to areas considered marginal for its cultivation. Production has remained fairly stable over recent years, resulting in exports of between 15,000 to 18,000 tons of green coffee, short of Rwanda's current quota under the International Coffee Agreement (25,400 Lons). In the past, the emphasis in research and production has been on yield maximization rather than quality improvement. The area under tea cultivation has increased steadily from about 1,600 ha in 1970 to 7,800 ha in 1981. The crop has no major problems or diseases that would require extensive research. The quality of tea is at present among the best in the world. Production of pyrethrum and cinchona has remained limited and erratic in the past and their future is highly uncertain due to the potenLial for development of cheaper synthetic substitutes. 27. Sector Issues and Strategy. A review of the agricultural sector conducted by the Rank was the subject of discussions (November 1983) with the Government, and its main conclusions and proposals for priority actions were agreed upon. The analysis suggests two overall objectives. First, an agricultural strategy for Rwanda should focus on maintaining national food self-sufficiency in light of Rwanda's rapidly expanding population. This is a priority objective of the Government's Third Dkvelopment Plan (1982-1986) and is also at the center of the recently published Food Strategy Report on Rwanda, prepared jointly by EEC and the Government. Second, agricultural exports, which account for a critical portion of Rwanda's foreign exchange, must be sustained and expanded with a focus on improving quality. 28. These ,wo objectives can best be achieved through a systematic policy encouraging broad based growth in production, .,ith the expected  - 9 - increases likely to result mainly from intensification of production. Priority actions to promote intensification include the generation and dis- tribution of new and improved technologies, which are urgently needed and should be attractive to farmers. The priorities for action, therefore, should be in developing and strengthening agricultural research, agricultural extensioc and the production and distribution of inputs. Concurrently, i. is essential to maintain, and if possible to improve, the agriculteral land, which is Rwanda s most important productive capital and is increasingly .hreatened by declining fertility and erosion.