Scaling up Aid or Scaling down : The Global Economic Crisis and Rwanda’s MDGs

Rwanda is not on track to achieve most of the Millennium Development Goals at a time when hopes for scaled-up aid are mixed with concerns that, in the context of the global economic crisis, aid instead will be scaled down. This paper analyzes the effects of alternative scenarios for grant aid, government spending allocations (between infrastructure, agriculture, and human development), and government efficiency. The authors use an economy-wide model for development strategy analysis, Maquette for Millennium Development Goal Simulations. Under a plausible scenario for increased aid, annual growth in gross domestic product increases by as much as 0.6 percentage points relative to a baseline with a growth rate of 6 percent; by 2020, the headcount poverty rate declines to 32 percent, 3 percentage points lower than for the baseline. A plausible scenario for reduced aid leads to a symmetric growth reduction but a more pronounced increase in poverty, at 40 percent in 2020. When aid increases, the most positive growth and poverty reduction impacts occur if spending increases are allocated to infrastructure and agriculture; progress in human health and education is significant but weaker than if additional spending is focused on these areas. Given synergies and diminishing marginal returns from expansion in a limited area, the scenarios that may appear most attractive and politically feasible have a broad and balanced expansion across government functions, promoting both growth and human development.

Bibliographic Details

Main Authors:	Lofgren, Hans, Nielsen, Hannah, Ezemenari, Kene
Language:	English
Published:	2009-06-01
Subjects:	ACCOUNTING, ADVERSE EFFECTS, AGRICULTURAL SECTOR, AGRICULTURE, ANNUAL GROWTH, BALANCE OF PAYMENTS, BANK POLICY, BASE YEAR, BENCHMARK, BORROWING, CALCULATION, CAPITA INCOMES, CAPITAL STOCKS, CHILD MORTALITY, COMMODITIES, COMMODITY, COMMODITY PRICES, COMPETITIVENESS, CONSTANT PRICES, CONSUMER, CONSUMPTION GROWTH, CONTRIBUTION, CONTRIBUTIONS, COST INCREASES, CURRENT ACCOUNT, CURRENT ACCOUNT DEFICIT, DATA AVAILABILITY, DEBT, DEBT STOCK, DECENTRALIZATION, DEPRECIATION, DEVELOPMENT INDICATORS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGIES, DEVELOPMENT STRATEGY, DIVERSIFICATION, DOMESTIC BORROWING, EARNINGS, ECONOMIC CONDITIONS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC MANAGEMENT, ECONOMIC PERFORMANCE, ECONOMIC SHOCKS, EDUCATIONAL INDICATORS, EDUCATIONAL SERVICES, ELASTICITY, ENVIRONMENTAL SUSTAINABILITY, EQUIPMENT, EXCHANGE RATE, EXPORT GROWTH, EXPORT PROMOTION, EXPORTS, EXTENSION SERVICES, EXTERNAL DEBT, EXTERNAL FINANCING, EXTREME POVERTY, FINANCES, FINANCIAL MANAGEMENT, FINANCIAL SUPPORT, FISCAL DEFICIT, FIXED INVESTMENT, FOREIGN CURRENCY, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN INTEREST, FULL EMPLOYMENT, GDP PER CAPITA, GINI COEFFICIENT, GLOBAL ECONOMY, GOVERNMENT ACCOUNTS, GOVERNMENT BORROWING, GOVERNMENT DEBT, GOVERNMENT FINANCES, GOVERNMENT FINANCING, GOVERNMENT INVESTMENT, GOVERNMENT INVESTMENTS, GOVERNMENT POLICIES, GOVERNMENT POLICY, GOVERNMENT SPENDING, GROSS DOMESTIC PRODUCT, GROWTH PATTERN, GROWTH PERFORMANCE, GROWTH RATE, GROWTH RATES, HEADCOUNT POVERTY, HEALTH CENTERS, HEALTH OUTCOMES, HIGH GROWTH, HIGH GROWTH RATE, HOLDING, HOUSEHOLD INCOMES, HOUSEHOLD SPHERE, HOUSEHOLD SURVEYS, HOUSEHOLD WELFARE, HUMAN CAPITAL, HUMAN CAPITAL DEVELOPMENT, HUMAN DEVELOPMENT, HUMAN HEALTH, HUMAN RESOURCE, IMPERFECT SUBSTITUTES, IMPORT TARIFFS, INCOMES, INFANT, INFANT MORTALITY, INFLATION, INFLATION RATES, INTEREST PAYMENTS, INTERNATIONAL BANK, INVESTING, INVESTMENT CLIMATE, INVESTMENT CLIMATE ASSESSMENT, LABOR FORCE, LABOR MARKET, LABOR MARKETS, LEVEL OF DEBT, LEVELS OF EDUCATION, LIMITED RESOURCES, LIVING STANDARD, LIVING STANDARDS, LOG-NORMAL DISTRIBUTION, LONG-RUN GROWTH, LOW-INCOME, LOW-INCOME COUNTRIES, MACROECONOMIC STABILITY, MAINTENANCE COSTS, MARGINAL BENEFITS, MARGINAL COST, MARGINAL COSTS, MARGINAL RETURNS, MARKET PRICES, MATERNAL HEALTH, MATERNAL MORTALITY, MATERNAL MORTALITY RATE, MILLENNIUM DEVELOPMENT GOAL, MILLENNIUM DEVELOPMENT GOALS, MONETARY FUND, MORTALITY RATE, NATIONAL POVERTY LINE, NEGATIVE SHOCKS, OFFICIAL DEVELOPMENT ASSISTANCE, OPEN ECONOMY, ORGANIZATIONAL STRUCTURE, POLICY MAKERS, POLICY OPTIONS, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POLITICAL ECONOMY, POPULATION GROWTH, POPULATION SHARE, POSITIVE EFFECTS, POVERTY RATE, POVERTY RATES, POVERTY REDUCTION, POVERTY REDUCTION STRATEGY, PRICE CHANGES, PRICE INCREASES, PRIMARY SCHOOL, PRIMARY SCHOOLING, PRIVATE CAPITAL, PRIVATE CAPITAL STOCK, PRIVATE INVESTMENT, PRIVATE SAVINGS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROGRESS, PROTECTIONISM, PROVISION OF EDUCATION, PUBLIC EXPENDITURE, PUBLIC FINANCE, PUBLIC INFRASTRUCTURE, PUBLIC SECTOR, PUBLIC WORKS, QUALITY OF EDUCATION, REAL EXCHANGE RATE, REAL GDP, RECURRENT EXPENDITURE, REMITTANCES, RESERVES, RESPECT, RETURNS, RURAL AREAS, SAFE DRINKING WATER, SALES, SANITATION, SANITATION FACILITIES, SAVINGS, SAVINGS RATE, SECONDARY EDUCATION, SECONDARY SCHOOLING, SECTOR REFORMS, SERVICE DELIVERY, SIGNIFICANT IMPACT, SKILLED LABOR, SKILLS DEVELOPMENT, SOCIAL PROTECTION, STOCK DATA, STOCKS, STRUCTURAL CHANGE, TAX, TECHNICAL ASSISTANCE, TERTIARY EDUCATION, TOTAL REVENUE, TRADE BALANCE, TRADE DEFICIT, TRANSPORTATION, TRUST FUNDS, UNIVERSAL PRIMARY EDUCATION, UTILITY MAXIMIZATION, VALUABLE, VALUE ADDED, VULNERABILITY, WAGE, WAGES, WATER MANAGEMENT,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090608143540 https://hdl.handle.net/10986/4151
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