Chapter I. INTRODUCTION
1.1. General introduction
The simplest possible economy cannot exist without producing
and consuming, so clearly we need account for these two fundamental activities,
even a very primitive economy, however, needs to set aside some of its current
production for the activity of accumulation. And we must recognize the fact
that virtually no economy can supply all its needs from its own resources, so
we need another account for the activity of foreign trade (V. Bulmer-Thomas,
1982: 2).
At present, the starting point of National Accounts
compilation is often the estimation of an Input-Output Tables or Supply and Use
tables (SUT). Those tables provide an excellent framework for combining the
so-called production approach and expenditure approach to the computation of
Gross Domestic Product (GDP). However, only cursory attention can be paid to
the third approach, the income approach. Expanding such tables in Social
Accounting Matrix (SAM) remedies this short coming of income of various
Institutional Sectors, and by providing a check on these income data through a
comparison with detailed expenditure figures for the same sectors (Steven,
1996: 146).
Again, every individual, each society and every country
strives for establishing a self sustained economic development, and Rwanda does
not make exception to this rule. For a sustained economic development , a
System of Economic and Social Accounting Matrix and Extension (SESAME) and a
National Accounting Matrix include Environmental Accounts (NAMEA) are needed
and are largely dependent on reliable information necessary to depict the past
and the present economic situation, so that future efforts can be assessed. The
supply and use tables (SUT) information, thus, is a key factor decision making
in such effort.
Thus, each country needs adequate information in its efforts
of providing welfare of their members. This idea has been emphasized by Welsch
& Short (1987:5), when they mentioned, «The dynamic and successful
society depends on the ability of each organization to measure and report its
accomplishments, to undergo critical self analysis, and, through sound
decision, to renew itself and grow. In this way, individual and social
objectives are sewed best».
For its economic development, Rwanda needs such information
system that helps in providing reliable information upon which economic
activities and economic decisions can be taken. This information system is
nothing other than information from SUT/I-O Table, SAM, NAMEA and SASEME within
the System of National Accounts.
1.2. Background to the study
The presentation of economic activities in accounts was first
established by William Petty (1676) and Gregory
King (1696). François Quesnay (1758) published
a table of total economy based on economic activities. Therefore, the term
supply and use table is not new. The first Supply and Use Tables known as
Input-Output Presentation or Leontief's Model was invented by Wassili
Leontief. This presentation became very useful in determining
the inter-industrial exchanges, and has been adopted in System of National
Accounts to view economic performance and prevision (Jean-Paul PIROU, 2006:
5).
On the other hand, the roots of SAM go back to the pioneering
work in social accounting by Gregory King in 1681.However modern social
accounting include SASEME and NAMEA which are largely inspired by the work of
Stone in connection with the Cambridge growth model in the 1950s and 60s and
Drud, Grain, and Pyatt (1983, 1986) studied how SAM can be usefully developed
in the development and understanding of model structures and results (Grahan
Pyatt, 1988: 327).
In 1953, United Nation Organization created an International
System of National Accounts (ISNA), which was revised in 1968, and European
Community created the European System Accounts in 1969.
In 1993, for the purposes of economic evolution and economic
information the ISNA was revised, and became System of National Accounts
(SNA93). In 1993 the System of National accounts has been defined with two main
identities which identify the efficiency of circular flow of income and
expenditure in economy (W. Tongeren, Bertha V., 2007: 4-24):
Supply of Goods and Services = Use of Good and Services
P+M+CM+TM+TP-SP = IC+ FC + FCFG + ?inv + EX
Today those two identities are mainly used to understand the
economy of a country during the whole year, and reports on Input-Output Tables
show that Developed Countries have achieved their development through the use
of it.
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