In few days back and through the President Paul Kagame’s popcast, I tried to listen to his speech of the year. What I noted for the strongman of Kigali, economic performance was on agenda. In reference to various polished statistics, the economic growth has been globally presented to the nation in general and to the international community.
But, really as one of my compatriots reacted on that speech if I can name it “Karahabutaka” in our Kinyarwanda, that speech is full of lies. Why? My response to this question you may ask to me, is this. First of All, President Paul Kagame contracted the reality each and every body knows in economics. Here our president and his advisors are against this theorem stating that :”Ceteris paribus, an increase in economic growth must cause inflation to drop, and a reduction in growth must cause inflation to rise”.
To prove this, we can refer to one economic principle started by our ancestor Milton Friedman (1912-2006).
With his one monetarist idea, we can start with the following famous equation of exchange:
MV = PY;
where M is the money supply; V is the velocity of money I mean the speed at which money circulates; P is the price level; and y is the real output of the economy (real GDP.)
If we can define inflation as general rise of level of prices on market and as the old saying goes, is caused by too much money “chasing” too few goods, here we can discover the economics’ empire of the Republic of Rwanda characterized by a no declared high inflation rate.
Simply , if we consider the arithmetical indicated above, If the growth rate of real GDP increases and the growth rates of M and V are held constant, the growth rate of the price level must fall. But the growth rate of the price level is just another term for the inflation rate; therefore, inflation must fall.
In Rwanda, this is a different case, now the president of the Republic of Rwanda sings the economic growth, but on market there is a spectacular increase of prices of goods and services.
As I am told, here we can state the following as an examples:
– 1kg of bean first quality is 800 frw equivalent to 1,2 USD;
– 1 Kg of sugar is sold between 705-800 Rfw depending of ;
– All prices of beers brewed locally have been increased
– Water and electricity have been increased by EWASA former Electrogaz
By concluding this, In Rwanda there no economic growth for all Rwandans. But, Yes there is a microeconomic growth, if I can say. Here, I mean economic growth for kagame and his inner circle. And my be, Paul kagame referred to Keynesian and Porter’s approaches, but also, we stand for proving this economic dilemma invented and incoroporated in Kagamenomics science.
Peter Urayeneza
