Macroeconomic Determinants of Electricity Access in Rwanda, an Empirical Analysis

Access to electricity by all categories of Rwandan population is a heavy problem which worries fiscal authorities in Rwandan economy. Households; factories in agriculture, manufacturing and mining; enterprises in hospitality and other services sector’ components all of them creates a growing demand for electricity. This paper highlights macroeconomic variables which determine the access to electricity in Rwanda and gives out the policy recommendations to improve generation and distribution of the electricity economically. Using the times series data spanning the period from 1997 to 2012 year, OLS method was used to estimate the zero intercept model, to test the significance of estimate and to confirm short and long-run relationship between variables. The simulations incorporated variables from capital investments and purchasing power of population dimensions. Two dimensions that describe the electricity supply and demand, and the third dimension of opportunity costs that describes where else resources that could be used to finance electricity generation, distribution and uptake are used in. The findings have shown that variables within these dimensions - gross capital formation, average interest rate on new external debt and agriculture - positively increase the access to electricity rate. Whereas, Adjusted Savings, Agriculture value Added, Claims on Central Government and Multilateral debt variables reduce the access to electricity rate. Their short, long-run impacts and priori expectations on access to electricity rate were statistically significant. Policy recommendations to policy makers are to efficiently negotiate - in favor of electricity generation and distribution – with Bretton-Woods institutions on multilateral debt and to increase the sensitization and empowerment of youth-women category to allow them participate in the agriculture value-added chain.