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Rwanda struggles to stop rising poverty as Covid-19 pushes economy into recession

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The Rwandan economy has fallen into its first recession in more than 25 years, with the World Bank warning it risks years of gains in poverty reduction.

In an economic update report, the World Bank said the country’s GDP fell by an estimated 0.2% in 2020, compared with a projected expansion of 8% before the onset of Covid-19.

The pandemic has left hundreds of thousands unemployed, and increasing consumer prices are pushing people into poverty, the report stated – adding that more than 550,000 people are likely to fall into poverty in 2021, with more than 80% of those being in rural areas.

“The severity of the effect is due at least in part to the fact that the crisis hit where it hurt the most: travel and hospitality services, which are the sectors in which the country has invested massively in recent years,” explained Calvin Djiofack, World Bank senior economist.

The pandemic is likely to stifle Rwanda’s economic development for a long time, the report found, with GDP expected to be 12% lower in 2021, and 19% lower in 2025, compared with pre-Covid-19 estimates.

This comes after more than two decades of relatively stable growth, with the last recession occurring in 1994, when the country was rocked by genocide.

The report states the Rwandan government has enacted a “swift and robust” response to Covid-19, including a $900m economic recovery plan spread over the 2019-20 and 2020-21 financial years.

The plan aims to scale up social safety net programmes for the most vulnerable, build infrastructure and support small businesses. Social safety net programmes have already reduced poverty by 1.2 percentage points (about 130,000 people) in 2020, and could reduce poverty by 1.7 percentage points (about 180,000 people) in 2021 if the government undertakes the expansion it plans to.

“The unprecedented impact of the crisis heightens the urgency of ensuring the availability of strong and adaptable programmes and policies to mitigate poverty,” said Rolande Pryce, World Bank country manager for Rwanda.

“By further expanding the coverage of well-targeted safety net interventions and prioritising investments in human capital, Rwanda can quickly and effectively mitigate the effects of the shock and lay the groundwork for future resilience.”

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