Rwanda: Economic and Political Overview
Rwanda registered a good economic performance over the last years, and thanks to investments in education and infrastructure, it reached the Millennium development goals, although macroeconomic imbalances have intensified. Throughout the late-1990s and sustained by reforms and ongoing donor assistance, growth gained momentum. It remained consistent, averaging 8.5% annually from 1995 to 2022. Significant enhancements in living standards ensued. However, after a robust rebound from the pandemic, real GDP expansion slowed to 6.2% in 2023. This deceleration was attributed to a widespread moderation across the services and manufacturing industries, alongside adverse weather conditions adversely affecting the agriculture sector. Despite the acceleration of post-disaster reconstruction spending and the recovery in the agricultural sector, real GDP growth is anticipated to moderate in the short term. This projection is based on expected policy measures aimed at supporting external balance and price stability. According to the IMF, growth is forecasted to reach 7% both this year and in 2025.
In FY22/23, the fiscal deficit stood at 7.3% of GDP. Projections indicate that the current account deficit will expand to 11.5% of GDP in 2023 and further to 11.8% of GDP in 2024. This widening is attributed to factors such as increased food imports, efforts for post-flood reconstruction, and the extensive airport construction project. Nevertheless, a steady enhancement in the current account is anticipated over the medium-term. This improvement will be bolstered by higher domestic savings resulting from policy adjustments (IMF). The debt-to-GDP ratio was estimated at 63.3% in 2023, with an upward trajectory expected over the forecast horizon (73.7% by 2025, IMF). Inflation was high in 2023 (14.5%), but should decrease to 6% this year and around 5% in 2025 (IMF).
According to the IMF, as of August 2023, the unemployment rate persisted at a high 18%, surpassing pre-pandemic levels. Particularly elevated rates were observed among females and the youth, standing at 21.9% and 21%, respectively. The disparity between male and female unemployment rates can be partially attributed to the limited employment prospects for women during periods of sluggish agricultural activity. Rwanda as a low GDP per capita, estimated at USD 2,793 in 2022 by the World Bank (PPP).
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
| GDP (billions USD) | 13.31 | 13.93 | 13.83 | 14.25 | 15.29 |
| GDP (Constant Prices, Annual % Change) | 8.2 | 6.2 | 7.0 | 7.0 | 7.3 |
| GDP per Capita (USD) | 1,005 | 1,032 | 998 | 1,006 | 1,057 |
| General Government Gross Debt (in % of GDP) | 61.1 | 63.3 | 72.1 | 73.7 | 72.2 |
| Inflation Rate (%) | n/a | 14.5 | 6.0 | 5.0 | 5.0 |
| Current Account (billions USD) | -1.31 | -1.77 | -1.56 | -1.50 | -1.51 |
| Current Account (in % of GDP) | -9.8 | -12.7 | -11.3 | -10.5 | -9.9 |
Source: IMF – World Economic Outlook Database, October 2021
The Rwandan economy relies on a subsistence economy, exports of tea and coffee, and tourism. The mining sector is also a significant contributor to the economy, with the country being one of the largest producers of tantalum, a crucial material used in mobile phone construction. Agriculture serves as the primary economic activity for Rwandans, directly employing 56% of the total population (World Bank). This sector constitutes 24.9% of GDP and contributes roughly 80% of foreign income from exports such as coffee, tea, hides and skins, horticulture, and pyrethrum (a chrysanthemum-based insecticide). Approximately 61% of Rwanda's soil is suitable for agriculture due to its fertile soils. However, food production often falls short of demand, necessitating imports. In 2023, aggregate cereal production was officially estimated at 847,000 tonnes, about 10% above the last five-year average, benefiting from favorable weather conditions (FAO).
The industrial sector in Rwanda is closely tied to the processing of primary agricultural products and represents 21.2% of GDP and 14% of employment. Nearly 70% of industries are concentrated in Kigali, with minimal activity in urban centers in the hinterland. The government is committed to gradually privatizing the productive sector and fostering the development of the private sector. Rwanda's manufacturing industry is modest yet expanding, witnessing a transition from basic production to more value-added activities across various sub-sectors. These include fast-moving consumer goods like detergents, body care products, plastics, as well as construction materials such as cement and steel bars. Additionally, there's a growing presence in furniture, laboratory equipment, electronic products, and automotive assembly, including phones, computers, and vehicles. Overall, the World Bank estimates the manufacturing sector to contribute 10% of GDP.
The tertiary sector accounts for approximately 46.5% of GDP and employs 30% of the total workforce. Rwanda's banking sector consists of 15 commercial banks, microfinance banks, development banks, and cooperative banks, with total assets worth RWF 6,485 billion as of June 2023 (data Rwanda Bankers' Association). Additionally, Rwanda aims to bolster the growth of its tourism industry and position itself as a regional leader in information and communication technologies. Tourism has emerged as a significant source of foreign exchange, driven in part by the rise in international conferences, and is expected to continue growing due to substantial investments in infrastructure.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 54.7 | 18.7 | 26.7 |
| Value Added (in % of GDP) | 24.9 | 21.2 | 46.5 |
| Value Added (Annual % Change) | 1.6 | 5.0 | 12.2 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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Latest Update: April 2024
