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The Role of Foreign Aid in the Fast-Growing Rwandan Economy: Assessing Growth Alternatives

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Foreign Capital Flows and Economic Development in Africa

Abstract

This chapter assesses the relationship between economic growth, structural change, and foreign aid inflows using Rwanda as an example. The chapter finds that the differential impact of the levels of foreign aid inflows on overall economic growth is modest, while the composition of growth differs significantly. Foreign aid inflows finance infrastructure investment, but they also affect the real exchange rate. High foreign aid inflows stimulate growth primarily in the non-tradable part of the economy and have a negative impact on growth in the tradables. The chapter’s findings are consistent with Rwanda’s recent growth, which has been dominated by the expansion of non-tradables. In rethinking about Africa’s growth sustainability, it needs to pay particularly attention to the role of domestic and regional markets in Africa.

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Author information

Authors and Affiliations

  1. International Food Policy Research Institute, Washington, DC, USA

    Xinshen Diao

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  1. Xinshen Diao
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Editors and Affiliations

  1. Pennsylvania State University, DuBois, PA, USA

    Evelyn Wamboye

  2. Birmingham-Southern College, Birmingham, Alabama, USA

    Esubalew Alehegn Tiruneh

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Diao, X. (2017). The Role of Foreign Aid in the Fast-Growing Rwandan Economy: Assessing Growth Alternatives. In: Wamboye, E., Tiruneh, E. (eds) Foreign Capital Flows and Economic Development in Africa. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53496-5_16

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  • DOI: https://doi.org/10.1057/978-1-137-53496-5_16

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  • Publisher Name: Palgrave Macmillan, New York

  • Print ISBN: 978-1-137-53495-8

  • Online ISBN: 978-1-137-53496-5

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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