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RWANDA 203


growth in the nonagricultural sector as a result of multiplier and linkage effects between agriculture and nonagriculture. Comparing increased GDP with increased AgGDP as the outcomes of RWF1 of additional public investment in agricultural staples, we see that increased GDP is RWF0.21 more than that of AgGDP, indicat- ing that returns to agricultural investment stimulates growth in the nonagricultural sector.


The Highest Economywide Returns from Investment Are from Staple Crops Using an approach similar to that discussed above, our study also measures returns to agricultural investments in different agricultural subsectors. The results show that economywide returns to public investment in staple crop production are the highest of all sectors. Spending on root crops is particularly effi cient. Given that both current yields and the use of modern inputs are extremely low for most grain and root crops (except for rice) in Rwanda, even compared to other Sub-Saharan African countries, the country needs to give a much higher priority to these crops than is usual. The high returns are also the result of a linkage effect, particularly for root crops, as pro- ductivity growth in such crops lowers pressure on land expansion, which is an extremely important factor that must be taken into consideration in any agricultural strategy for Rwanda. Staple crops are broadly consumed by poor consumers in both rural and urban areas, and reduced food prices from productivity-led growth benefi t the poor consumers and create more growth opportunities in other agricultural and nonagricultural sectors. However, the amount of investment specifi ed in EDPRS (Rwanda, MINECOFIN 2008) will not be enough to signifi cantly improve the low yields of many crops nationwide. The average yield for maize will be as low as 1.5 mt/ha even in 2015, a level many African countries have already reached.


Trade-Offs Exist between Exports and Overall Growth When Investing in Export Crops Although investment in export crops has the highest impact on growth in these subsectors, the economywide returns are quite low. The growth rate of coffee and tea can reach double digits with targeted investment to the export sector, measured by increased GDP over time; however, such investment has the lowest returns of all sectors, particularly in the case of coffee. The reason for these low returns is mainly due to the weak linkages with other economic activities both on the production and consumption sides. It is possible to strengthen such linkage effects in the export sector by promoting agroprocessing with high-value addition (because of weak income–consumption linkages), but the same amount of public investment in the export sector is not likely to become a dominant driver for both overall economic growth and poverty reduction.


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