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Rwanda Economic Update, January 2021 : Protect and Promote Human Capital in a Post-COVID-19 World

Jan 1, 2021

The lockdown, social distancing, and increased costs associated with the COVID-19 pandemic have reduced output and employment, increased poverty, and depressed trade transactions; in the absence of a strong response by government, output will be lower over the next decade due to COVID-19. The pandemic-driven rise in the fiscal deficit is increasing public debt, thus exacerbating existing challenges to sustainability and increasing the urgency of shifting from large public investments to human capital development as the main driver of growth. The government's rapid response to the pandemic has succeeded in keeping the population share of new infections and of deaths well below that of most other countries. However, critical health services, particularly childhood immunization and nutrition services, have been disrupted, which is increasing stunting and preventable diseases. The combination of poorer nutrition, limited health services, learning losses from school closures, and the likelihood that some children (particularly adolescent girls and children from poor households) may never return to school will reduce incomes and productivity over the medium term. The government responded rapidly and effectively to the challenges posed by the pandemic, putting in place the Economic Recovery Plan (ERP) to support households and firms, quickly imposing constraints on mobility to limit the spread of the disease, ramping up social protection programs, and setting up remote learning. Key priorities going forward include: (i) improving the government's expenditure allocation, financial management and revenue mobilization; (ii) strengthening the resilience of the health system and preparing for administration of a vaccine; (iii) reducing learning losses (targeting the most vulnerable), improving skills and strengthening accountability in education; and (iv) expanding the flagship social safety net program, building adaptive systems to respond quickly to shocks, improving poverty targeting of safety net programs, and scaling up the use of digital payments.