Rwanda has a developing economy. It is a low-income developmental state based on services, agriculture and industry. It has been described as undergoing early industrialisation due to newer government policies. It has a mixed economy. Since the early 2000s, Rwanda has witnessed an economic boom, which improved the living standards of many Rwandans. The president of Rwanda, Paul Kagame, has noted his ambition to make Rwanda the "Singapore of Africa". The industrial sector is growing, contributing 16% of GDP in 2012.
History
Before the civil war and genocide In the 1960s and 1970s, Rwanda's prudent financial policies, coupled with generous external aid and relatively favorable terms of trade, resulted in sustained growth in per capita income and low inflation rates. However, when world coffee prices fell sharply in the 1980s, growth became erratic.
Compared to an annual GDP growth rate of 6.5% from 1973 to 1980, growth slowed to an average of 2.9% a year from 1980 through 1985 and was stagnant from 1986 to 1990. The crisis peaked in 1990 when the first measures of an IMF structural adjustment programme were carried out. While the programme was not fully implemented before the war, key measures such as two large devaluations and the removal of official prices were enacted. The consequences on salaries and purchasing power were rapid and dramatic. This crisis particularly affected the educated elite, most of whom were employed in civil service or state-owned enterprises.
During the 5 years of civil war that culminated in the 1994 genocide, GDP declined in 3 out of 5 years, posting a rapid decline at more than 40% in 1994, the year of the genocide. The 9% increase in real GDP for 1995, the first postwar year, signalled the resurgence of economic activity.
After the genocide (1994–2005)
The 1994 genocide destroyed Rwanda's fragile economic base, severely impoverished the population, particularly women, and eroded the country's ability to attract private and external investment. However, Rwanda has made significant progress in stabilizing and rehabilitating its economy. In June 1998, Rwanda signed an Enhanced Structural Adjustment Facility with the International Monetary Fund. Rwanda has also embarked upon an ambitious privatization programme with the World Bank.
In the immediate postwar period—mid-1994 through 1995—emergency humanitarian assistance of more than $307.4 million was largely directed to relief efforts in Rwanda and in the refugee camps in neighbouring countries where Rwandans fled during the war. In 1996, humanitarian relief aid began to shift to reconstruction and development assistance.
The United States, Belgium, Germany, the Netherlands, France, the People's Republic of China, the World Bank, the UN Development Programme and the European Development Fund will continue to account for the substantial aid. Rehabilitation of government infrastructure, in particular the justice system, was an international priority, as well as the continued repair and expansion of infrastructure, health facilities, and schools.
After the Rwandan Genocide, the Tutsi-led government began a major programme to improve the country's economy and reduce its dependence on subsistence farming. The failing economy had been a major factor behind the genocide, as was overpopulation and the resulting competition for scarce farmland and other resources. The government focused primarily on building up its manufacturing and service industries and eliminating barriers to trade and development.
The Government of Rwanda posted a 13% GDP growth rate in 1996 through improved collection of tax revenues, accelerated privatization of state enterprises to stop the drain on government resources, and continued improvement in export crop and food production. Tea plantations and factories continue to be rehabilitated, and coffee, always a smallholder's crop, is being more seriously rehabilitated and tended as the farmers' sense of security returns.
Coffee production of 14,578,560 tonnes in 2000 compares to a pre-civil war variation between 35,000 and 40,000 tonnes. By 2002 tea became Rwanda's largest export, with export earnings from tea reaching US$18 million equating to 15,000 tonnes of dried tea. Rwanda's natural resources are limited. A small mineral industry provides about 5% of foreign exchange earnings. Concentrates exist of the heavy minerals cassiterite (a primary source of tin), and coltan (used to manufacture electronic capacitors, used in consumer electronics products such as cell phones, DVD players, video game systems and computers).
By mid-1997, up to 75% of the factories functioning before the war had returned to production, at an average of 75% of their capacity. Investments in the industrial sector continue to mostly be limited to the repair of existing industrial plants. Retail trade, devastated by the war, has revived quickly, with many new small businesses established by Rwandan returnees from Uganda, Burundi, and the Democratic Republic of the Congo.
Industry received little external assistance from the end of the war through 1995. Beginning in 1996–97, the government became increasingly active in helping the industrial sector to restore production through technical and financial assistance, including loan guarantees, economic liberalization, and the privatization of state-owned enterprises. In early 1998, the government set up a one-stop investment promotion centre and implemented a new investment code that created an enabling environment for foreign and local investors. An autonomous revenue authority also has begun operation, improving collections and accountability.
Cassiterite production peaked at 1,000 tonnes in 1990, but was under 700 tonnes in 2000. Recorded coltan production has soared from 147 tonnes in 1999 to 1,300 tonnes in 2001, and coltan was the country's biggest single export earner in 2001. At least part of the increase in production is because of new mines opening up in Rwanda. However it is true, as has frequently been observed, that the increase is also because of the fraudulent re-export of Congolese coltan. In addition to the well-publicised involvement in this trade of the Rwandan Defence Force (RDF), another important factor in the coltan re-export is that international dealers are under pressure not to buy from the DRC, thus increasing the incentive for DRC coltan to be re-exported as Rwanda's. Rwanda is also alleged to be trading in fraudulently exported gold and diamonds from the DRC.
2006–present
The country entered a high period of economic growth in 2006, and the following year managed to register 8% economic growth, a record it has sustained since, turning it into one of the fastest-growing economies in Africa. This sustained economic growth has succeeded in reducing poverty and also reducing fertility rates, with growth between 2006 and 2011 reducing the percentage of the country's population living in poverty from 57% to 45%.The country's infrastructure has also grown rapidly, with connections to electricity going from 91,000 in 2006 to 215,000 in 2011. Rwanda wants to achieve Middle Income Country status by 2035 and High-Income Country status by 2050.
Existing foreign investment is concentrated in commercial establishments, mining, tea, coffee, and tourism. Minimum wage and social security regulations are in force, and the four prewar independent trade unions are back in operation. The largest union, CESTRAR, was created as an organ of the government but became fully independent with the political reforms introduced by the 1991 constitution.
In 2016, Rwanda was ranked 42nd and second best country in Africa to do business in the Mara Foundation's Ashish J. Thakkar Global Entrepreneurship Index report. As of 2020, it is ranked 38th best for doing business, and remains the second best country in Africa for doing business by the World Bank Ease of Doing Business Index.World Bank (2020) Economy Profile: Rwanda, Ease of Doing Business Report. Comparing business regulation in 190 economies. Accessible at: https://www.doingbusiness.org/content/dam/doingBusiness/country/r/rwanda/RWA.pdf Upon elimination of this ranking, the World Bank published a new index, B-READY, in 2024; evaluating countries on their overall attractiveness and business readiness. Rwanda currently ranks 13th, just below Hong Kong, of 50 countries.
However, research in the UK-based political science journal, Review of African Political Economy, indicates that economic growth may be slower than what official figures suggest. Researchers stated that average consumption per household closely followed growth in GDP per capita from 2000 to 2005, but diverged afterwards when average consumption per household stagnated despite huge improvements in GDP per capita from 2005 to 2013. From 2006 to 2026, Rwanda has sustained a growth rate oscillating between six and nine percent, with the exception of the COVID pandemic, where GDP contracted 2.5%. One risk to future GDP growth in the country, despite generous incentives to attract foreign investment, including a 0% corporate income tax for qualifying firms, the political environment which has been under one-party leadership since 1994 and the ongoing conflict with neighboring DRC.
Agriculture and primary resources
Crops grown in the country include coffee, tea, pyrethrum, bananas, beans, sorghum and potatoes. Coffee and tea are the major cash crops for export, with the high altitudes, steep slopes and volcanic soils providing favourable conditions. Reliance on agricultural exports makes Rwanda vulnerable to shifts in their prices. In 2019 agriculture accounted for 29% of the economy of Rwanda. Rwanda produced in 2019: Bananas, pineapples, tea, coffee, and tobacco are high-value, export-oriented products.
2.6 million tonnes of banana 1.2 million tonnes of sweet potato 1.1 million tonnes of cassava 973 thousand tonnes of potato 484 thousand tonnes of beans 421 thousand tonnes of maize 256 thousand tonnes of pumpkin 171 thousand tonnes of taro 159 thousand tonnes of sorghum 131 thousand tonnes of rice 114 thousand tonnes of sugarcane 105 thousand tonnes of tomato 36 thousand tonnes of pineapple 31 thousand tonnes of tea 29 thousand tonnes of coffee 5.4 thousand tonnes of tobacco
Rwanda's economy suffered heavily during the 1994 Genocide, with widespread loss of life, failure to maintain the infrastructure, looting, and neglect of important cash crops. This caused a large drop in GDP and destroyed the country's ability to attract private and external investment. The economy has since strengthened, with per-capita GDP (PPP) estimated at $2,225 in 2018, compared with $416 in 1994. Major export markets include China, Germany, and the United States. The economy is managed by the central National Bank of Rwanda and the currency is the Rwandan franc; in June 2010, the exchange rate was 588 francs to the United States dollar. Rwanda joined the East African Community in 2007 and there were plans for a common East African shilling, which it had been hoped would be in place by 2015, but have not yet reached fruition (2020).
Rwanda is a country of few natural resources, and the economy is based mostly on subsistence agriculture by local farmers using simple tools. An estimated 90% of the working population farms, and agriculture comprised an estimated 42.0% of GDP in 2010. Since the mid-1980s, farm sizes and food production have been decreasing, due in part to the resettlement of displaced people. Despite Rwanda's fertile ecosystem, food production often does not keep pace with population growth, and food imports are required.