The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Rwanda is a unique case among its Sub-Saharan African peers in that it has already undergone a large scaling-up of public investment. The Rwandan government has made clear its desire to lower its reliance on foreign aid while still maintaining high public investment levels. We use the model of public investment, growth, and debt sustainability in Buffie et al. (2012) to evaluate the macroeconomic consequences of a possible scaling-down of investment in Rwanda. Using the model, we can gauge the consequences of different financing mechanisms and investment efficiency levels on the economy. We find that with some commercial borrowing and a modest tax adjustment, the authorities may be able to retain their high investment spending while still reducing their reliance on foreign aid.