The Sustainable Financing of the Agricultural Sector in Rwanda

Rwanda has aimed to achieve food self-sufficiency but faces binding land and budgetary constraints. A set of government policies have been in force for 20 years that have controlled the major cropping decisions of farmers. A cost–benefit analysis methodology is employed to evaluate the financial and resource flow statements of the key stakeholders. The object of the analysis is to determine the sustainability of the prevailing agricultural policies and donor financed interventions in the agricultural value chains from the perspectives of the farmers, the economy, and the government budget. A total of nine value chains were evaluated including seven crops, dairy and poultry. The study has revealed that, in crops value chains, only a third of the (7 scenarios have positive returns and 15 have negative returns) scenarios of crops cultivated in various regions generate positive economic returns. In all provinces, one or more of the crops were either not sustainable from the financial perspective of the farmers or are economically inefficient in the use of Rwanda's scarce resources. The annual fiscal cost to the government of supporting the sector is substantial but overall viewed to be sustainable. A major refocusing is needed of agricultural policies, away from a mono-cropping strategy to one that allows the farmers to adapt to local circumstances. A more market-oriented approach is needed if the government wishes to achieve its economic development goal of having a sustainable agricultural sector that supports the policy goal of achieving food self-sufficiency. The situation is different in the dairy value chain. USAID interventions designed to increase farm level productivity and create/expand market access for small scale dairy farmers resulted in increase of the dairy farmer's income, as well as stimulated value- added activities in the value chain and reduced price of milk for low-income consumers. The Government of Rwanda policies to reduce cost of production for poultry farmers increase financial returns and stimulate farmers to invest more resources into the poultry farming. However, main constraint to further growth of the Rwanda poultry sector is its dependence on imports, including ingredients for the local production of poultry feeds, as well as pharmaceutical products. To further increase competitiveness of the dairy value chain the Government of Rwanda should address the limited domestic supply of day-old chicks and availability of poultry vaccine.