Rwanda

Rwanda has achieved impressive development progress since the 1994 genocide and civil war. It is now consolidating gains in social development and accelerating growth while ensuring that they are broadly shared to mitigate risks to eroding the country’s hard-won political and social stability.

Rwanda’s long-term development goals are embedded in its Vision 2020 which seeks to transform Rwanda from a low-income agriculture-based economy to a knowledge-based, service-oriented economy by 2020.

In order to achieve the long-term development goals, the government of Rwanda has formulated a medium-term strategy. The Economic Development and Poverty Reduction Strategy (EDPRS 2)’s highest priority is growth acceleration and poverty reduction through its four thematic areas: economic transformation, rural development, productivity and youth employment, as well as accountable governance. The EDPRS 2 aims to achieve the following goals by 2018: (i) increasing GDP per capita to $1,000, (ii) reducing the poverty rate to below 30% and (iii) the reducing extreme poverty rate to below 9%. An underlying macroeconomic assumption is to accelerate annual GDP growth to 10% over the period 2013-2018.

These goals build on remarkable development success over the last decade including high growth, rapid poverty reduction and, since 2005, reduced inequality. Between 2001 and 2012, real GDP growth averaged 8.1% per annum. The poverty rate dropped from 59% in 2001 to 45% in 2011 while inequality reduced from 0.52 in 2005 to 0.49 in 2011.

Development Challenges

Going forward, the private sector, still largely informal, will have to play a bigger role in ensuring economic growth. Poor infrastructure and the lack of access to electricity and limited generation capacity are some of the major constraints to private investment. Some reforms have been implemented successfully to improve the business environment and reduce the cost of doing business. As a result, the country was named top performer in the Rwanda Doing Business 2014   report, among the ten most improved economies in 2013 and Rwanda is now ranked as the second easiest place to do business in Sub-Saharan Africa.

In addition, reducing the country dependency on foreign aid (40% of the current budget) through a mobilization of domestic resources is critical. While Rwanda has been effectively using aid for development, the country remains vulnerable to fluctuations in aid flows. Starting in mid-2012, Rwanda experienced a sudden and sharp decline in aid. Through appropriate fiscal and monetary policies, high growth and stability prevailed throughout 2012 (economic growth was 7.3 percent and inflation below 6 percent). However, starting mid-2013, Rwanda experienced lagged impact of foreign aid shortfall, causing economic growth to decelerate to 4.6 percent. The government has successfully increased the domestic revenues to GDP ratio in the past several years, but the level is still far below the regional average. 

The World Bank Group (WBG) is finalizing a new Country Partnership Strategy (CPS) framed around three thematic areas:  i) Accelerating economic growth that is private-sector driven and job-creating ii) Improving the productivity and incomes of the poor through rural development and social protection and iii)Supporting accountable governance through public-financial management and decentralization . The new CPS is jointly prepared by the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in an effort to achieve greater synergies and catalyze higher volumes of private resources to support Rwanda’s development. It builds on the Government’s second Economic Development and Poverty Reduction Strategy (EDPRS II) and on its proposed Division of Labor (DoL) among Development Partners (DPs)

Rwanda has achieved impressive development progress since the 1994 genocide and civil war. It is now consolidating gains in social development and accelerating growth while ensuring that they are broadly shared to mitigate risks to eroding the country’s hard-won political and social stability.

Rwanda’s long-term development goals are embedded in its Vision 2020 which seeks to transform Rwanda from a low-income agriculture-based economy to a knowledge-based, service-oriented economy by 2020.

In order to achieve the long-term development goals, the government of Rwanda has formulated a medium-term strategy. The Economic Development and Poverty Reduction Strategy (EDPRS 2)’s highest priority is growth acceleration and poverty reduction through its four thematic areas: economic transformation, rural development, productivity and youth employment, as well as accountable governance. The EDPRS 2 aims to achieve the following goals by 2018: (i) increasing GDP per capita to $1,000, (ii) reducing the poverty rate to below 30% and (iii) the reducing extreme poverty rate to below 9%. An underlying macroeconomic assumption is to accelerate annual GDP growth to 10% over the period 2013-2018.

These goals build on remarkable development success over the last decade including high growth, rapid poverty reduction and, since 2005, reduced inequality. Between 2001 and 2012, real GDP growth averaged 8.1% per annum. The poverty rate dropped from 59% in 2001 to 45% in 2011. Starting in mid-2012, Rwanda experienced a sudden and sharp decline in aid. Through appropriate fiscal and monetary policies, high growth and stability prevailed throughout 2012. The economy grew by 8% and inflation was contained below 6%.

Development Challenges

Going forward, the private sector, still largely informal, will have to play a bigger role in ensuring economic growth. Poor infrastructure and the lack of access to electricity and limited generation capacity are some of the major constraints to private investment. Some reforms have been implemented successfully to improve the business environment and reduce the cost of doing business. As a result, the country was named top performer in the Rwanda Doing Business 2013 report, among the ten most improved economies in 2013 and Rwanda is now ranked as the third easiest place to do business in Sub-Saharan Africa.

In addition, reducing the country dependency on foreign aid (40% of the current budget) through a mobilization of domestic resources is critical. While Rwanda has been effectively using aid for development, the country remains vulnerable to fluctuations in aid flows. The government has successfully increased the domestic revenues to GDP ratio in the past several years, but the level is still far below the regional average.

Last updated: October 2013

The portfolio currently comprises 9 active projects and with net commitments of US$ 475 million.

Approximate shares are agriculture (48%), energy (31%), capacity building /skills development (11.7%), and transport (5.3%). Other sectors include private sector development, social protection, and demobilization and reintegration. Project objectives have ranged from helping farmers manage marshland and hillside cropping to rehabilitating water supply systems and providing electricity to rural households.

Some of the key projects and programs funded by the World Bank include the Rwanda Electricity Access Scale-up and Sector Wide Approach (SWAp) Development Project (US$70 million), Land Husbandry, Water Harvesting and Hillside Irrigation (US$69million) and Rwanda Second Support to Social Protection System (US$50 million).

Towards market-oriented agriculture

Through a three phased “Adaptable Program Loan”, the World Bank supports The Rural Sector Support Project (RSSP) which focused on intensifying production in the marshlands and was followed by the Land Husbandry, Water Harvesting and Hillside Irrigation (LWH) Project that started in 2010 and aimed at increasing productivity on hillsides and developing parts of these hillsides for irrigated horticulture production.

Since the beginning of RSSP1 in 2001, over 7,200 hectares of marshlands have been rehabilitated or developed, and nearly 30,000 hectares of hillsides have been sustainably developed by LWH since 2010. Maize yields have improved from 1.6 tons/ha to nearly five tons/ha; while rice yields have improved from three tons/ha to 6.30 tons/ha; and potato yields have improved from 7 tons/ha to nearly 20 tons/ha. In addition a number of rural infrastructures have been put in place to link productive areas to markets.

So far, of over 61,000 people who benefited from the RSSP projects, over44% are females as are 50% of the 87,000  people who have benefited from the LWH. The impact created by these two programs is creating transformation in rural Rwanda

Expanded access to electricity

The World Bank supports the Rwanda’s Electricity Access Rollout Program (EARP) , an electricity rollout program whose objective is to increase the number of households connected to the electricity grid to 350,000 by 2013 from the initial 110,000 in 2009. The electrification program has led to an extension of the number of working hours and reduced

The challenge is now to increase generation capacity. The Sustainable Energy Development Project provides advisory and technical support, including micro hydropower feasibility studies. International Finance Corporation (IFC) has provided loans to the private developers, and Multilateral Investment Guarantee Agency (MIGA) has provided a guarantee to the 25MW Kivuwatt methane plant.

Strengthening social protection

The World Bank has helped to expand the Vision 2020 Umurenge Program (VUP), the government’s main safety net program, to cover 43% of the country’s 416 geographical sectors in 2012, up from just 7% when the program was launched in 2008. The number of poor people benefiting from the program has grown from less than 10,000 to over half a million in the same period. Under the VUP, 68% of households which benefit from cash transfers are women headed households while 46% of participants in public works are women.