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Studies on Economic Development and Growth in Selected African CountriesFiscal Effects of Aid in Rwanda

Studies on Economic Development and Growth in Selected African Countries: Fiscal Effects of Aid... [This paper analyzes the dynamic relationshipDynamic relationship between foreign aidForeign aid and domestic fiscal variablesDomestic fiscal variables in Rwanda using a co-integrated vector auto-regressiveVector auto-regressive model for quarterly data over the period 1990Q1–2015Q4. The results show that aid and fiscal variables form a long-run stationary relationship and that aid is a significant element of long-run fiscal equilibriumFiscal equilibrium and the hypothesis of aid exogeneity is not statistically supported; anticipated aid appears to have been taken into account in budget planningBudget planning. Aid is associated with increased tax efforts, public spendingPublic spending, and lower domestic borrowingsDomestic borrowing. Aid has contributed to improved fiscal performanceFiscal performance in Rwanda, although the slow growth in tax revenue and regular aid shortfalls has prevented sustaining a balanced budget inclusive of aid. In terms of policy, continued efforts by donors to coordinate aid delivery systemsAid delivery system, make aid more transparent, and support improvements in government fiscal statisticsGovernment fiscal statistics will all contribute to improving fiscal planningGovernment fiscal planning. Recipients need to know how much aid is available to finance spending and how this is delivered, that is, whether through donor projects or government budgets.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Studies on Economic Development and Growth in Selected African CountriesFiscal Effects of Aid in Rwanda

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Publisher
Springer Singapore
Copyright
© Springer Nature Singapore Pte Ltd. 2017
ISBN
978-981-10-4450-2
Pages
79 –101
DOI
10.1007/978-981-10-4451-9_5
Publisher site
See Chapter on Publisher Site

Abstract

[This paper analyzes the dynamic relationshipDynamic relationship between foreign aidForeign aid and domestic fiscal variablesDomestic fiscal variables in Rwanda using a co-integrated vector auto-regressiveVector auto-regressive model for quarterly data over the period 1990Q1–2015Q4. The results show that aid and fiscal variables form a long-run stationary relationship and that aid is a significant element of long-run fiscal equilibriumFiscal equilibrium and the hypothesis of aid exogeneity is not statistically supported; anticipated aid appears to have been taken into account in budget planningBudget planning. Aid is associated with increased tax efforts, public spendingPublic spending, and lower domestic borrowingsDomestic borrowing. Aid has contributed to improved fiscal performanceFiscal performance in Rwanda, although the slow growth in tax revenue and regular aid shortfalls has prevented sustaining a balanced budget inclusive of aid. In terms of policy, continued efforts by donors to coordinate aid delivery systemsAid delivery system, make aid more transparent, and support improvements in government fiscal statisticsGovernment fiscal statistics will all contribute to improving fiscal planningGovernment fiscal planning. Recipients need to know how much aid is available to finance spending and how this is delivered, that is, whether through donor projects or government budgets.]

Published: May 3, 2017

Keywords: Domestic fiscal variables; Aid; CVAR; Rwanda; C32; F35; O23; O55

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