The African Development Bank (AfDB) has approved a concessional loan of $97.675 million to Rwanda to strengthen its national budget as it works to mitigate impacts of the COVID-19 pandemic.
The funding will take the form of an African Development Fund loan, which the Bank is providing the under its COVID-19 Response Facility.
Rwanda mounted a swift and decisive response to counter the effects of the pandemic that included social distancing, suspension of domestic and international travel, remote working, and on 21 March, a total lockdown of the country. However, since 4 May 2020, the government has partially reopened the country.
Under the Crisis Response Budget Support Program, the Rwandan government will use the funding to strengthen the health system to contain the spread of COVID-19; safeguard economic resilience; and mitigate the pandemic’s impact on vulnerable sectors of the population.
Health sector measures entail bolstering surveillance, infection prevention and control capacity so the health authorities can better monitor, track and identify hotspots; enhance laboratory capacity for testing; and treatment of the severely ill. Another element is risk communication and community engagement on the disease.
The government will work to shore up economic resilience by clearing arrears to domestic suppliers, enabling the private sector to continue to invest, pay taxes and repay loans. Through an approved Economic Recovery Fund (ERF), the government will support hard-hit businesses and sustain employment and promote domestic production of medical equipment, masks, gloves and sanitizers.
The COVID-19 containment measures combined with weaker global demand and disruptions in the global supply chain have mainly impacted the hospitality, education, services, agriculture and trading sectors. This has led to losses in revenues and jobs, especially those related to causal workers, informal sector including micro small and medium enterprises, and those laid off in the formal economy. This loss of income is threatening to push households into poverty, especially those that were living at the poverty margin before the pandemic.
In response, government has approved the Economic Recovery Program which will scale up existing social protection and healthcare programs to these vulnerable segments of the population.
“We are pleased to provide this crisis response budget operation to support the Government of Rwanda in their efforts to contain the negative impact of the COVID-19 on the people of Rwanda and the government fiscal space,” said Nnenna Nwabufo, the Bank’s Acting Director General for East Africa, “We are confident that the government will execute the planned programs with great efficiency and diligence.”
Under a worst-case scenario, Rwanda’s real GDP in 2020 is forecast to contract by 2.0 %. Further, as 90% of the workforce is employed in the private sector, mostly in small and informal enterprises, shutdown measures can be expected to sharply raise unemployment.
The proposed budget support program is aligned with the Government of Rwanda’s National Preparedness and Response Plan and Economic Recovery Plan. It also aligns with the Bank Group’s Ten-Year Strategy and the High 5 priority “improve the quality of life of the people of Africa”.