Rwanda - Banque Rwandaise de Developpement Project

COPY s c r n vDocument of FILE Uue rThe World Bank FOR OMCIAL USE ONLY Report No. P-1886-RW REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF RWANDA FOR A RWANDA DEVELOPMENT BANK PROJECT June 24, 1976 This document has a restricted distributlon and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Currency Equivalents Unit : Rwandese Franc (RwF) US$1 : RwF 92.84 RwF 1 : US$ 0.01 RwF 1,000 : US$ 10.77 RwF 1,000,000 US$10,771.22 Fiscal Year January 1 - December 31 Abbreviations BRD = Rwanda Development Bank (Banque Rwandaise de Developpement) CCCE Caisse Centrale de Developpement Economique (France) DEG = Deutsche Entwicklungsgesellschaft KfW = Kreditanstalt fur Wiederaufbau UNIDO = United Nations Industrial Development Organization UNDP = United Nations Development Programme  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF RWANDA FOR A RWANDA DEVELOPMENT BANK PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Rwanda for the equivalent of US$4.0 mIllton on standard IDA terms to help finance the foreign exchange require- ments of the Rwanda Development Bank (BRD) through June 1978. The proceeds of the credit would be relent to BRD for a period substantially in conformity with the aggregate of the amortization schedules of the sub-loans, but not exceeding a period of 20 years in the case of tourism projects and 15 years in the case of other loans or Investments, at an interest rate of 4 percent per annum. PART I - THE ECONOMY 2. A report entitled "Recent Economic Development and Prospects of Rwanda" (No. 422a-RW) was distributed to the Executive Directors on July 24, 1974. An economic updating mission visited Rwanda in October 1975 and its report is being completed. A summary of the mission's findings is set out below. Country data sheets are attached as Annex I. 3. With an average per capita income of about US$80, Rwanda is one of the poorest countries in the world. It is included in the United Nations List of the "25 least developed countries", and has also been designated "most seriously affected" by recent economic developments. The country became independent in 1962. It is lacking in both administrative and physi- cal infrast rticture, and iiust overcome formiidable constraints to its devel-o p- ment. Overwhelmingly a subsistence economy with only an embryonic modern sector, it faces land shortages and a rapid growth in population. The de- velopment of export-based agriculture is limited *by the priority of food crop prodticuion and.Rwanda's inland posILion (1,700 km away from the near- cst port at Mombasa),-whlle the potential for expansion of the industrial sector is constrained by ;a lack of raw materials, mineral deposits and an appropriately 'trained -labor-force. 4. Despite these handicaps, the present Government, since Its ascent to power in July 1973, has made perceptible progress in developing a strategy to lift the economy from its present low level.- Some aspects of the country's characteristi,s are favorable and it is ar0iind these that the Governount has designed Its strategy. The population has a certain unity, deriving from similarities In customs, ways of life and standard-of living throughout the country. Income and wealth distribution are remarkably even. There are neither the remnants of a strong traditional hierarchy nor signs of signifi- cant emerging urban-rural polarization. Moreover, the small size of the country reduces the administrative difficulties and at the same time limits This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  serious regionalism. The country also has a natural asset in its relatively fertile soil which, provided that the problem of erosion in Rwanda's hilly terrain can be overcome, can give good yields for a variety of crops. To take advantage of and preserve these admittedly modest assets, the Government has recognized that its development policies must be built around a careftlly in- tegrated and balanced strategy reaching the entire population. Althougih obliged to pursue export crop development to earn foreign exchange and domes- tic revenues, increases In food crop productivity are at the core of the Government's proposed strategy. 5. Pressure on land, combined with traditional cultivation methlods that degrade and erode the soil, make food crop intensification the natIon's first priority. The growth rate of the population is 2.8 percenL per year, and 60 percent of the population Is less than 20 years old. At the saime time, all good agricultural land is already occupied and only limited amounLs' of marginal land remain available. Over the last two years the Government has begun preparatory work on a rural development plan which would focus huture efforts on food crop production at the level of the commune - the smaiLest administrative unit comprising an average of 30,000 inhabitants. In doing so, the Government has recognized that its approach must be directed towards the farmers' needs, with careful integratlon at both the grass-roots and &cntral levels. The emphasis on food crops would be linked with soil conserva"tLon and livestock development, and supported by extension services and necessary in- frastructure such as markets, local roads, and storage facilities enab'ling the Government to implement an appropriate pricing policy. Infrastrufture improvements would rely on local initiative where possible; under the plan, local labor and other resources would also be used to back up economiL im- provement with social betterment in the form of simple health facilities, schools and training centers, and village water supply. Much preparatrfy work on the plan still remains to be done, but with the Government's presenL strong commitment to a rural development policy, it is likely that ftf her progress can be made. An IDA agricultural sector mission recent]y vigited Rwanda and will provide further assistance to the Government regarding possi- ble alternatives for the implementation of a rural development strategy. 6. Faced with the prospect of a doubling of the population by (he and of the century, the Government has ultimately little choice but to ad6pt a policy to limit population growth. EmigratLon is considered by some is a short run alternative, but the practlical possibilities are limited. iithough family planning is a sensitive issue, the Government has set up Lwo coimmis- sions which are gradually examining various aspects of this problem, atnd senior officials appear to have open minds on the subject. Most of the reservations concern implementation difficulties rather than outright objee- tion. This new attitude is an important. .lement and gives hoe) that &