Rwanda - Structural Adjustment Credit Project

 Structural adjustment credit Report No: ; Type: Report/Evaluation Memorandum ; Country: Rwanda; Region: Africa; Sector: Economic Management; Major Sector: Multisector; ProjectID: P002248 December 29, 1995 Rwanda: Structural Adjustment Credit (Credit 2271-RW) The Implementation Completion Report (ICR) for the Rwanda Structural Adjustment Credit (Credit 2217-RW, approved in FY91) was prepared by the Africa Regional Office. There is no Borrower's contribution to the ICR but useful comments from the Borrower are included in the Aide Memoire of the completion mission. They highlight the positive impact of continuity in Bank processing and supervision but indicate that the Bank was sometimes slow in responding to Government requests. The main objectives of this SDR 67.5 million credit were to restore macroeconomic and public finance equilibrium, enhance economic competitiveness and create conditions for sustained growth and poverty reduction. More specifically, the credit supported measures to (i) establish a competitive exchange rate; (ii) liberalize the financial sector, domestic and foreign trade; (iii) privatize public enterprises and reduce subsidies in the coffee sector; (iv) introduce public investment programming, as well as tax and other civil service reforms; and (v) provide a satisfactory social safety net. The operation was prepared prior to the outbreak of civil war in 1990 and approved following the cease-fire agreement in early 1991. Parts of the program were initially implemented, but the continuing civil war and the fall of coffee prices, as well as weak implementation capacity, meant that the overall objectives were not achieved during the first two years of the program. In spite of some achievements in tax reform, public finance targets were not met. Exchange rate and trade liberalization measures were taken, but exchange controls were later reinstated. Interest rates were liberalized partially. Some public enterprises were liquidated and others partially privatized, but subsidies in the coffee sector were not removed. Moreover, a number of civil service reforms and safety net measures were never implemented. Disbursements were suspended in December 1993 due to delays in implementing the program. The death of the President in a plane crash led to violent ethnic strife and social disintegration. The second tranche was canceled in December 1994. The ICR rates the program outcome as unsatisfactory, institutional development as negligible, and sustainability as unlikely. The Operations Evaluation Department (OED) agrees with the ratings. OED also rates Bank performance as satisfactory. While, with hindsight, the design appears optimistic, demanding and complex, the high risks of the operation were acknowledged upfront and corrective Bank action was taken early on when implementation problems appeared. The ICR is of good quality. The main lesson drawn by the ICR relates to the risk of implementing structural adjustment programs under unsettled political conditions. No audit is planned.