Economics SSE

Key unit Competency:

Analyse the contribution of development strategies on the economy.

Introductory activity

Funding Public Investments 

In general, there are three sources for funding and financing public investments: 

i) Internal funding sources, ii) external funding support and iii) borrowing as 

financing source with the requirement to be paid back at least partly. 

Internal funding sources entail domestic tax and non-tax revenues, which are 

used to fund the recurrent as well as the development budget. 

External funding support refers to Budget and Project Support from Development 

Partners. According to the Rwanda Aid Policy from 2006, Budget Support is the 

transfer of resources from a Development Partner to the Rwandan budget. The 

same lines of authority and procedures that govern the normal Rwandan budget 

are applicable...

(Source: National Investment Policy. MINECOFIN April, 2017)

From the above extract, 

(i) Identify the three sources of funding public investments highlighted in the 

case study above.

(ii) With relevant examples give the sectors you know where the government 

has invested extensively. 

(iii) Why do you think the government at times uses external support and 

borrowing to fund public investment?

(iv) Between infrastructure and education, which sector in your own view should 

receive the biggest share of public investment? Justify your answer.

11.1: Education.

11.1.1. Meaning of education.

Activity 11.1

a) Analyse the activity taking place in each of the two pictures above. 

And identify the difference if any. 

b) Which one are you familiar with?

Education refers to the process of acquiring worthwhile knowledge, skills 
and values that aid an individual to engage in development activities of his/her 
country. The knowledge may be technical know-how of something, facts of an 
event, among others while the skills may be reading, drawing, speaking among 
others and finally the values may be love for the environment, socialization 

among others 

Education is both formal and informal; 

Formal education; This is a set of worthwhile knowledge, skills and values 
obtained from organized institutions, monitored by qualified personnel and 
following a well-made curriculum. These institutions from which it is acquired 

may be schools, universities and other training institutions.

Informal education is a set of worthwhile knowledge, skills and values 
obtained from outside the formal set up i.e it can be got from anywhere or 

anyone and any time. There is no organized curriculum to be followed.

11.1.2: Role of education to development.

Activity 11.2.

In order to realize the aim articulated in 1.6 (Rwanda Education policy 
2003, General objective) , the following general objectives shall be defined 

in education:

- To educate a free citizen who is liberated from all kinds of 
discrimination, including gender-based discrimination, exclusion and 

favouritism;

- To contribute to the promotion of a culture of peace and to emphasize 
Rwandese and universal values of justice, peace, tolerance, respect 

for human rights, gender equality, solidarity and democracy;

- To dispense a holistic moral, intellectual, social, physical and 
professional education through the promotion of individual 
competencies and aptitudes in the service of national reconstruction 

and the sustainable development of the country;

- To promote science and technology with special attention to ICT;

- To develop in the Rwandese citizen an autonomy of thought, patriotic 
spirit, a sense of civic pride, a love of work well done and global 

awareness;

- To transform the Rwandese population into human capital for 

development through acquisition of development skills.

- To eliminate all the causes and obstacles which can lead to disparity 

in education be it by gender, disability, geographical or social group.

- (Source: Education policy. 2003)

- Basing on the above objectives of the education policy in Rwanda 
(2003), discuss the role of education in facilitating economic growth 

in the country.

Education, in every sense, is one of the fundamental factors of economic 
development. No country can achieve sustainable economic development 
without substantial investment in human capital. Education enriches people’s 
understanding of themselves and world. It improves the quality of their lives 
and leads to broad social benefits to individuals and society. Education raises 
people’s productivity and creativity and promotes entrepreneurship and 
technological advances. In addition, it plays a very crucial role in securing 
economic and social progress and improving income distribution. Economists 
therefore, accept that investment in education, or human capital, is an important 

element in the economic development process as below.

- Increases technological knowledge of labour and this can help in skill 

development necessary for development

- Encourages innovation and invention which may lead to development of 

technology in the country

- Encourages people to acquire good standard of living. This is because the 

people get exposed to different ways of life

- Breaks cultural rigidities since people have knowledge about the outside 

world hence they can implement what they study about the outside world.

- Saves foreign exchange spent on expatriates since the country is able to 

produce its own citizens that can do the work of the expatriates.

- It helps to reduce the rate of population growth. The educated tend to like 
smaller families because they understand the dangers related to bigger 

families.. They also understand well the use of population control methods.

- Reduces the subsistence sector since the educated will be in search for 

money therefore they will engage in commercialized agriculture. 

- Widens the tax base since it provides employment to the people after 
studying and still in the education sector employment opportunities are 

created.

- May lead to reduction in the population growth rate since the educated 
knowledge about the control measures and the dangers of population 

explosion

However, on the other side, if no well-set education policies are put in place, 

education may hamper development in the following ways. 

- May cause balance of payment problem because the educated tend to copy 

and buy expensive things from abroad (high rates of demonstration)

- Causes unemployment especially when theoretical and creates job seekers 

than creators.

- Causes rural urban migration as the educated seek better opportunities in 

the urban centers leading to open urban unemployment

- Social discrimination among the educated and the uneducated as the 

educated see themselves as superior

- Accelerates income inequality since the educated will acquire better paying 

jobs than the uneducated 

- May lead to brain drain in search for employment opportunities abroad after 

failing to get employment home.

11.1.3: Problems faced by education sector in developing 

countries.

Activity 11.3

Key challenges in the sector

Despite considerable progress made in the education sector over the last 

five years, some key challenges remain. These are priorities that need to be 

addressed in this ESSP. The 2017 Education Sector Analysis (MINEDUC, 

forthcoming) outlines five key challenges, including the following:

Challenge 1: Insufficient teacher competencies in subject content, 

pedagogy and languages of instruction (English and Kinyarwanda) 

threaten to jeopardise curriculum delivery and inclusion, and ultimately 

negatively impact on student learning outcomes.

(Source: EDUCATION SECTOR STRATEGIC PLAN 2018/19 TO 

2023/24 Page 24)

Analyse the case study in the extract above and 

a) Identify the challenges in the education sector mentioned therein.

b) In reference to the above what do you think are the other challenges 

facing the education sector in Rwanda?

Education at a global level is one of the challenges that countries have prioritized 
for this century. It is a complex and laborious task that involves sustainable 
policies and to some extent agreements with various nations aimed tackling the 
difficulties and inefficiencies in developing countries’ education sector. In many 
developing countries, there are several challenges to this sector. Some of which 

include the following.

-Lack of expertise: An increasingly technological world requires an effort in 
terms of specialisation and professional training. However, there are limited 
skilled and specialized personnel at all levels in the education sector in most 
developing countries. Most qualified instructors move to other sectors and 

even abroad where they can have better remuneration.

-Limited motivation to teachers has led to limited teaching staff: A lack of 
economic resources goes hand in hand with a lack of a greater number of 
teachers in most developing countries. Currently, there is a wave of teacher 
migration, ending up emigrating and together with the lack of educational 
resources for the training of new professionals, most developing countries 
have been deprived of the would-be potential teachers. Those who try to 
persevere, end up bringing up half-baked products since they are under paid 

thus their morale down.

-Non-compulsory education: Many countries do not value the obligation of 
school attendances within their laws. Parents are not obliged to educate their 
children and therefore the children may not be registered at school or only 
attend classes on the days they wish. This leads to absenteeism and poor 

quality education output.

-There are limited teaching/learning materials, most of the subjects are 
theoretically taught, and this keeps the education sector backward.

-The education curriculum in developing countries is still colonial based. 
Most of the subjects taught and their content is no longer relevant, they train 
learners for white collar jobs, they make more job seekers than job makers so 

accounting for the rampant unemployment in the country.

-Inequality: The world’s illiterate population consists of 780 million people. 
Two thirds of these are women. The need for the inclusion of girls, right from 
primary school to university education, is essential to achieve the goal of 
universal education, but unfortunately, male prejudice is still something that 
is present which makes education difficult to attain for many women. Some 
parents prefer to educate boys compared to girls and this has accelerated 

gender inequality and income inequality among the males and females.

-Inefficient and ineffective school networks like use of digital 
education and better schools to take on more students hampers education in 
developing countries. Digital education as a technological aid, helps teachers 
and students by making an infinite stream of knowledge available, which 
can be renewed and updated without increased costs in school materials. 
However, this is lacking in most developing countries, making children who 
attend school, to leave the education system without gaining basic reading 

and mathematics skills.

-High school dropout rate: Many children leave school before completing 
their education due to family pressures like to look after the home while parents 
are working, taking care of younger siblings or being sent directly to work or 
marry before they are legally of age in order to contribute financially to the 
family, hence leading to many drop outs. This deprives the economy of a big 

number of future skilled labour force and entrepreneurs.

-The economic crisis that has been felt in most developing countries has 
resulted into reduced education budgets, leading to inadequate funds for 
the education sector. This leaves some areas and schools in the rural areas 

with lack of equipment to use hence hindering the development. 

-The economic crisis that has been felt in most developing countries
has resulted into reduced education budgets, leading to inadequate funds
for the education sector. This leaves some areas and schools in the rural areas
 with lack of equipment to use hence hindering the development.

11.1.4: Measures of promoting education.

Activity 11.4.

The ESSP identifies a total of 17 sector outcomes under nine strategic 

priorities, with targets that are both ambitious but feasible. Actions 

to achieve these outcomes are further elaborated in this chapter. New 

areas under this ESSP include STEM, ICT, innovation, research and 

development, all of which are key national priorities. In addition, the 

competency-based curriculum includes entrepreneurship and business 

development, citizenship and national identity, with an emphasis on critical 

thinking, creativity and innovation, research, problem-solving and lifelong 

learning. There is also a strong focus on improving quality through both, 

regular assessment of learners and teacher continuous professional 

development (CPD).

(Source: EDUCATION SECTOR STRATEGIC PLAN 2018/19 TO 

2023/24 Page 24)

Basing on the above case study, discuss and identify the policy measures 

that can be adopted to solve the challenges faced in the education sector 

in Rwanda.

Education is a fundamental human right and an essential tool to ensure that all 
Rwandese citizens; women and men, girls and boys realize their full potential. 
The development of human resources is one of the principal factors in achieving 
sustainable economic and social development. Education and training have 
been considered as a critical fulcrum to achieve development and poverty 
reduction in Rwanda. Even if Rwanda has made significant progresses in terms 
of access to education, there is a need to improve the quality of education. Here 

are some of the ways Rwanda has put in place to improve her education sector:

- A New Educational Model: Investing in test scores and achievement is 
no longer a useful way to focus on education, therefore, a new educational 
model combining traditional content with important financial, health and 
administrative skills has been put in place through curriculum revision from 
knowledge based to competence-based curriculum (from KBC to CBC). 
Students are now made to practice teamwork, leadership and critical thinking. 
They also gain exposure to entrepreneurship projects such as identifying and 
exploiting market opportunities through business ideas such as community 
recycling. This shift away from standardized learning is preparing Rwandan 
students to make a positive impact on the social and economic wellbeing of 

their communities.

- Improved Resources for Teachers: Computer-assisted learning is 
inevitably improving education in Rwanda and has enhanced the educational 
experience of both teachers and students. The computers that have age
appropriate learning software and a technically educated staff that knows 
how to maintain them has been implemented in most schools in Rwanda. 
These methods to improve education in Rwanda, will continue to encourage 
student enrollment, and most importantly, will ensure that children stay in 

school and learn more while they are there.

- The Ministry of Education (MINEDUC) has been active in promoting the 
use of ICT in schools and coordinating the One Laptop per Child project 
in the country. ICT education is extending from tertiary institutions to all 

primary and secondary schools.

- Promoted vocational education so as to produce students that have 
practical skills and can start their own businesses instead of waiting for 

employment.

- There are regular inspections of all learning institutions to assess the 
quality of education, infrastructures, human resources, student recruitment 
and curriculum. Education being a shared responsibility between parents, 
teachers and policymakers, Rwanda saw it necessary to keep evaluating 
the progress in education by taking stock of what has worked, what has not 

worked and the gaps so as to improve the quality of education.

- Increased teacher remuneration and motivation so as to increase 
their performance and achievement. For example, the recently announced 
10 percent salary increment for teachers in state schools and government 
subsidized schools is expected to create a solid foundation for retaining 
and attracting the former and new teachers respectively. This will Increase 
the motivation of the teachers so that they can carry out their activities 

genuinely and professionally. 

- Provided parents with information on the value of education: This 
is aimed at increasing and maintaining school enrollment. Most adults in 
Rwanda are illiterate and do not have the awareness necessary to improve 
both their living conditions and those of their children. Responsible leaders 
at local levels in all parts of the country have been tasked to educate parents 
about the value of educating their children and to make them aware that a 

parent’s investment in education is crucial for the success of their children. 

- Reduced the cost of Education through cost sharing: Rwanda 
has abolished school fees in primary schools, while in secondary schools 
through the 9- and 12-years basic education the government has undertaken 
paying part of the students’ tuition and the students pay a smaller part and 
applied cost sharing especially in high institutions of learning. The move 
has triggered a large increase enrollment especially in primary level and 

thus has reduced the rate of school dropouts. 

 -Policies for girl child have been embarked on through reducing their 
entry points at the higher institutions of learning and also when recruiting for 
secondary schools. Organizations such as Imbuto Foundation in Rwanda 

has had a major role in girl child education. 

- Encouraged active participation of the private sector in the 
education system through taking up government educational programs 

as well as setting up new schools at affordable fees structures. 

- Educational loans to help the students at higher levels. This is 
common in Rwanda under the government fees/ tuition structure where the 
students in the higher institutions are given educational loans and they pay 

back in installments on completion of the studies when they get jobs.

- Expanded access to pre-school, including better nutrition to reduce 
malnutrition among young children through tightening school and district

level management of the early grade.

- Capped class size at no more than 50 students per class by hiring new 

staff, and expanding affordable, proven models of early grade instruction.

- Location of the schools close to rural habitations, pro-poor 
conditional cash transfers and related publicity campaigns on the benefits 

of schooling.

- Strengthened professionalism of teachers to improve outcomes. 
Recently, it has been proposed that low-performing teachers should 
have options for improvement and exit for those falling short of minimum 
professional standards. There is recent move by the government to only 
recruit education professionals because, with teachers being a major factor 
in quality of education and progression of students, the task of educating 
Rwandan children should be entrusted to highly trained, well skilled and 
passionate people right from nursery to higher institutions of learning. 
Therefore, serving educators need to be subjected to structured guides 
and competency-based training options, along with career progression 
pathways through CPD courses like the recently graduated primary and 

secondary headteachers, deputy head teachers, teachers and TTC tutors.

- Government implemented a school feeding programme that is 

partially subsidized but involves a compulsory cost-share with parents.

Application activity 11.1

From your knowledge of the education sector in your district and the 
problems facing it, write a proposal to the District Director of Education 

(DDE) suggesting practical ways of improving education in your district.

11.2. Foreign aid and economic development

Activity 11.5.

(i) Identify the organisations highlighted in the pictures above.

(ii) What do you know about them? 

(iii) Apart from the above organisations, what other organisations and 

countries have come in to help Rwanda’s development drive? 

(iv) In which ways have these and other organisations helped developing 

economies to grow.

11.2.1: Meaning and forms of foreign development.

11.2.1.1: Meaning of foreign aid.

Foreign Aid is the international transfer of resources either on loan or grant 
from one country to another. Or it can be defined as any form of assistance 
given by one country to another so as to achieve its intended objective. It can 

either be economic, technical, and military among others. 

11.2.1.2: Forms of foreign aid.

- Capital which may include money and machines. 

- Consumer goods like clothes, food among others that are needed in 

times of disaster.

- Military aid i.e. military hardware.

- Education facilities like text books and scholarships.

- Grants, these are resource transfers that do not require any repayment.

- Loans. These are resource transfers that must be paid back with or 

without interest. There are two types of loans.

a. Soft loans. These are given with a long grace period, long repayment 

period and a very low or no interest at all.

b. Hard loan. This type of a loan attracts a high interest rate, a very 

short or no grace period and a very short repayment period.

- Direct foreign investment. These are resource transfers by foreign 

business people in form of business companies or investments.

- Man power aid. These are re11.2.2: Need for foreign aid.source transfers to developing countries in 
form of high-level qualified personnel like teachers, economists, technicians, 

doctors, researchers etc.

- Medical aid. This is extended to developing countries in form of drugs, 
medical research, and construction of health centers to improve upon the 

health of people.

- Tied aid. This is extended to the recipient country with strings attached. It 

is sent to serve a specified purse and sometimes in a specified place.

- Multilateral aid. This is aid from multilateral companies and international 
agencies. Major multilateral donors are; USAID, UN, I.M.F, world bank among 

others

- Bilateral aid. This is a government to government aid. One country giving 

aid to the other, major bilateral donors are; Great Britain, U.S.A, China.

11.2.2: Need for foreign aid.

Activity 11.6.

The picture above shows the 2nd page of the Rwanda poverty profile report 

2016/17.

(i) Identify the organisations that were involved in making the survey.

(ii) Which of the organisations identified in (i) above do not belong to the 

Government of Rwanda? 

(iii) Why do you think Rwanda seeks assistance from such organisations/

countries?

Countries, especially with developing economies, need foreign aid due to the 

following reasons.

- To close the domestic savings-investment gap due to lower savings 

relative to desired investment.

- To reduce the tax burden on their citizens, this keeps them with enough 
disposable income, increase their purchasing power hence improved living 

standards in the economy generally.

- To increase domestic productivity through growth of skills and provision 

of high wages.

- To accelerate industrial growth by providing both initial and running 

capital

- To close the forex gap due to low export base.

- To facilitate development and expansion of domestic infrastructure
e.g. transport and communication facilities, power projects etc.

- To fund the budget deficits e.g. seeking for soft loans and grants to 
supplement domestic revenue. This increases a country’s resources and 

helps in meeting its deficits especially in the national budget.

- To relieve the country of effects of disasters by seeking for relief 
materials for the people displaced or affected by such disasters / calamities 
like famine, landslides earth quakes and floods which normally leave nations 

in a helpless state. Thus, countries seek foreign aid to help regain their stand.

- To close the skilled manpower gap because of the low education and 
training through aid in form of technical assistance. The skilled manpower 
that is inadequate in developing countries alongside its need is covered by 

the manpower aid from developed nations.

- To close the technology gap in developing countries through technological 
transfer; aid in form of machines and other equipment to developing countries 
improves upon quality of output and production methods so developing 

countries.

- To provide employment opportunities to people in developing 
countries. If aid is directly invested, it employs people of developing 

countries and indirectly to people who supply to the investments put up.

- To close the foreign exchange gap in developing countries. Financial 
aid extended to developing countries in form of foreign currencies increases 
foreign exchange reserves in developing countries hence developing their 

economies.

- To increase availability of commodities to the citizens of their 

country. E.g. aid in form of consumer and capital goods.

- To strengthen international relations since foreign aid may help keep 

good political ties with others.

11.2.3: Problems of relying on foreign aid.

Activity 11.7.

From your own thinking, what are the dangers resulting from depending 

on foreign resources by any given country for its development progress?

- It worsens the debt servicing problem; loans contracted must be 
paid back and on several occasions with interest, this drains the national 

resources and denies nationals essentials.

- There is high balance of payment deficit. The high out flow of 
resources to pay back loans and service them worsens the balance of 

payment position of the country.

- Sometimes the technological aid given is inappropriate, it may be 
too under developed or beyond the standards of developing countries, 

so it may just be wasted.

- Sometimes the pre-conditions set for foreign aid are disastrous 
for the country. Countries may be forced to devalue their currency, 
retrench workers or even accept anti-social inhuman acts like 

homosexuality in order to receive their aid.

- Tied foreign aid is sometimes tied to unproductive projects like 
digging boreholes in rural areas, financing wars. This brings difficulty in 

paying back since such projects do not bring monetary returns.

- The political strings tied to the aid sent ruins the country its 
independence. Sometimes nations are forced to vote democratically 

which they are not ready for or even change leaders.

- Foreign aid slows down initiative and hard work. Citizens of 

developing countries become lazy expecting to live on aid.

- Foreign aid erodes the social and cultural values of nationals. 
They tend to adopt the cultures of the donor whom they normally take as 

their role model.

- Foreign aid distorts planning of developing countries. This is 
because it normally comes in bits and normally it’s not completed or 

even sent as promised.

- Foreign aid reduces local production as people expect to live on 

foreign sent goods. This retard economic growth of nations.

Application activity 11.2

From your knowledge on foreign aid,

c) Why do you think countries give out aid to others?
d) What do you think developing countries can do to reduce the level 

of dependence on foreign aid?

11.3: Infrastructure and economic development.

Activity 11.8.

Study the pictures A - J above and; 

a) Identify what each of them shows. 

b) What general economic term is given to the above pictures 

collectively?

c) Discuss how they facilitate the growth of Rwanda’s economy.

11.3.1: Meaning of Infrastructure.

Infrastructure can broadly be defined as long-term physical and structural 
elements/assets of the economy that facilitate the provision of goods and 

services that are geared towards development of the country.

Social Infrastructure is a subset of the infrastructure sector that includes 
assets that accommodate social services and improve the welfare of the 
population. It can also be defined as a combination of basic facilities which 
are necessary for human development. Examples of social infrastructure assets 

include schools, universities, hospitals, prisons and community housing. 

Economic infrastructure on the other hand refer to internal facilities of 
a country that make business activity possible, such as communication, 
transportation, and distribution networks, financial institutions and markets, and 
energy supply. It can also be defined as a combination of basic facilities which 

is helpful in economic development of an economy and businesses.

It can be seen that social infrastructure is very important because it lays ground 
for the economic infrastructure. Both of these infrastructures are complementary 

to each other and are necessary for the overall development of an economy.

The examples of infrastructure in different sectors can be seen in the table 

below.

11.3.2: Role of infrastructure in economic development 

Infrastructure development has played a very significantly positive role in 
the growth performance of countries in recent times. Where development 
of economic infrastructures has followed a rational, well - coordinated and 

harmonized path, infrastructure has received the following big boost:

- It provides services that are part of the consumption bundle of residents.

- Roads and other transport infrastructures facilitate production by 
easing the movement of inputs from their sources to the firms and output 

from the firms to the market.

- Large - scale expenditures for public works increase aggregate demand

and provide short- run stimulus to the economy

- It serves as an input into private sector production, thus augmenting 

output and productivity

- Education is a very important source of economic growth as the 
Denison study shows. Even though education may be a social investment, 
it is also an economic investment since it enhances the stock of human 

capital. 

- Health, like education, is a very important argument in the socio- economic 
production function. A popular saying is that ‘a sound mind usually resides 
in a healthy body’. Health is one of the major determinants of labour 

productivity and efficiency.

- Investment in infrastructure is often considered as one of the most 

effective tools for fighting poverty. 

- Access to infrastructure is essential for improving economic 
opportunities and decreasing inequality. For example, adequate 
transportation networks in developing countries could give the poor better 
access to schools, hospitals, and centers of commerce, which in turn 
would improve the education, health, and entrepreneurial opportunities 

that strengthen a country’s economic potential.

- Housing enables people to have a peace mind and thus also improves 

their standards of living and livelihoods.

- Sport facilities are used for co-curricular activities that enable to 
have a disease free body. A healthy body is a health mind as the saying 

goes, these facilities improve on the life expectancy of the people

- Prisons as part of correction centers and the justice help to educate 
and bring right the people who may have created offences. They also 

educate the prisoners and they come out changed

- Bus stations, car parks, rides and communication centers help to connect 
people through transit. They aid in communication and linking of the 

people to other areas 

Application activity 11.3

Chronological Evolution of the Roads in Good Condition (Source: RTDA, 2017

In your own view, why do you think the government has put a lot of effort in 

maintaining a high standard of road infrastructure in the country?

End unit assesment

1.a) Describe why education is regarded as: 

v) An investment

vi) A consumer good.

b) How has education solved the problem of underdevelopment in 

Rwanda?

2. Explain why countries find it beneficial to give assistance to other?

3. “Without infrastructure in a country like Rwanda, there is no 

development” support the above statement.