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 has enjoyed political stability since 1994. The last parliamentary elections held in September 2013 saw 64% of the seats taken by women candidates and the Rwandan Patriotic Front, which maintained absolute majority in the Chamber of Deputies. President Paul Kagame is serving his second and last term and presidential elections are due in 2017.
Rwanda’s long-term development goals are embedded in a strategy entitled Vision 2020, which seeks to transform Rwanda from a low-income agriculture-based economy to a knowledge-based, service-oriented economy with a middle-income country status by 2020.
In order to achieve these long-term development goals, the government of Rwanda has formulated a medium-term strategy. The second Economic Development and Poverty Reduction Strategy (EDPRS II)’s highest priority is growth acceleration and poverty reduction through five thematic areas: economic transformation, rural development, productivity and youth employment, and governance accountability. The EDPRS aims to achieve the following goals by 2018: increase gross domestic product (GDP) per capita to $1,000, reduce the poverty rate to below 30%, and reduce the extreme poverty rate to below 9%.
These goals build on remarkable development successes over the last decade which include high growth, rapid poverty reduction and, since 2005, reduced inequality. Between 2001 and 2014, real GDP growth averaged at about 9% per annum. Recovering from the 2012 aid shortfall, the economy grew 7% (year-on-year) in 2014, 2.3 percentage high than in 2013.
Going forward, the private sector, which is still largely informal, will have to play a bigger role in ensuring economic growth. Poor infrastructure and lack of access to electricity are some of the major constraints to private investment. Some reforms have been successfully implemented to improve the business environment and reduce the cost of doing business. As a result, Rwanda was one of the top reformers in the Doing Business 2015 report, and is now ranked the third easiest place to do business in Sub-Saharan Africa.
In addition, reducing the country dependency on foreign aid (30% to 40% of the budget) through domestic resource mobilization is critical. While Rwanda has been effectively using aid for development, the country remains vulnerable to fluctuations in aid flows. In 2012, Rwanda experienced a sudden and sharp decline in aid. Through appropriate fiscal and monetary policies, high growth and stability was maintained in 2012: economic growth was 8.8% and inflation rate was 6.3%. However, starting in mid-2013, Rwanda experienced a lagged effect of the aid shortfall, causing economic growth to decelerate to 4.7%. The government has successfully increased the tax to GDP ratio from 11.9% in 2009-2010 to 14.8% in 2013-2014, nevertheless, domestic revenues mobilization remained low.
Rwanda is on track to meet most of the Millennium Development Goals (MDGs) by the end of 2015. Strong economic growth was accompanied by substantial improvements in living standards, evidenced by a two-thirds drop in child mortality and the attainment of near-universal primary school enrolment. A strong focus on homegrown policies and initiatives contributed to a significant improvement in access to services and in human development indicators. The poverty rate dropped from 59% in 2001 to 45% in 2011 while inequality measured by the Gini coefficient reduced from 0.52 in 2006 to 0.49 in 2011.
Last Updated: Apr 10, 2015