Small and landlocked, Rwanda is hilly and fertile with a densely packed population of about 12.5 million people (2018). It borders the far larger and richer Democratic Republic of Congo, as well as its closest East African neighbors, Tanzania, Uganda, and Burundi.
With the support of the International Monetary Fund (IMF) and the World Bank, Rwanda has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade.
Rwanda has guarded its political stability since the 1994 genocide against the Tutsi. Parliamentary elections in September 2018 saw women fill 64% of the seats, the Rwandan Patriotic Front maintain an absolute majority in the Chamber of Deputies and, for the first time, two opposition parties, the Democratic Green Party of Rwanda and Social Party Imberakuri, winning two seats each in the parliament. President Paul Kagame was re-elected to a seven-year term in the August 2018, following an amendment to the constitution in December 2015 allowing him to serve a third term.
Rwanda now aspires to reach Middle Income Country (MIC) status by 2035 and High-Income Country (HIC) status by 2050. This aspiration will be carried out through a series of seven-year National Strategies for Transformation (NST1), underpinned by detailed sectoral strategies that are aimed toward achievement of the Sustainable Development Goals.
The NST1 came after the implementation of two, five-year Economic Development and Poverty Reduction Strategies—EDPRS (2008-12) and EDPRS-2 (2013-18), under which Rwanda experienced robust economic and social performances. Growth averaged 7.2 % over the decade to 2019 , while per capita growth domestic product (GDP) grew at 5% annually. The lockdown and social distancing measures, which were critical to control the COVID-19 pandemic, sharply curtailed economic activities in 2020. The government expects GDP to drop by 0.2% in 2020, compared to a projected expansion of 8% before the COVID-19 outbreak.
Rwanda was in the middle of an economic boom prior to the COVID-19 (coronavirus) pandemic. Economic growth exceeded 10% in 2019, driven mostly by large public investments for implementation of the National Strategy of Transformation. Strong growth was expected to continue in 2020.
The pandemic has disrupted international flows of goods and services with significant spillovers to the broader global economy. Exports and tourism are taking a strong hit amid disruption in international trade and travel. Rwanda is already feeling mounting balance of payment and fiscal pressures. This could negatively impact the provision of public health services with respect to COVID-19 response and preparedness capacity, as well as adversely affect the provision of other essential health service delivery in Rwanda, as healthcare workers and fiscal resources are redirected to the emergency response.
To help the government prevent, detect and respond to the threat posed by the pandemic, and strengthen national systems for public health preparedness, the World Bank Group provided $14.25 million International Development Association credit in immediate funding to a new operation, the Rwanda COVID-19 Emergency Response Project.
Rwanda’s public-sector led development model has shown limitations, as public debt has increased significantly in recent years. Rwanda’s growth model has relied heavily on large public investments (12.3% of gross domestic product (GDP) in 2019) leading to substantial fiscal deficits financed mainly through external borrowing. Consequently, the debt-to-GDP ratio rose to 56.7% in 2019 (from 19.4% in 2010). External financing through grants, concessional and non-concessional borrowing played an important role in financing public investments. Going forward, the private sector will play a bigger role in helping to ensure economic growth. Low domestic savings, skills, and the high cost of energy are some of the major constraints to private investment. Stronger dynamism in the private sector will help to sustain high investment rate and accelerate the growth. Promoting domestic savings is viewed as critical. Inclusive growth also remains a critical challenge. The poverty reduction momentum has weakened in recent years, increasing the urgency to design a medium-term public investment strategy to achieve a more efficient allocation of resources geared toward projects critical for broad-based and inclusive economic recovery following the pandemic.
Rwanda’s strong economic growth was accompanied by substantial improvements in living standards, with a two-thirds drop in child mortality and near-universal primary school enrollment. A strong focus on homegrown policies and initiatives has contributed to significant improvement in access to services and human development indicators. Measured by the national poverty line, poverty declined from 77% in 2001 to 55% in 2017, while Life expectancy at birth improved from 29 in the mid-1990s to 69 in 2019. The maternal mortality ratio has fallen from 1,270 per 100,000 live births in the 1990s to 290 in 2019. The official inequality measure, the Gini index, declined from 0.52 in 2006 to 0.43 in 2017. However, the COVID-19 crisis is dramatically increasing poverty, and threatening human capital. The headcount poverty rate is likely to rise by 5.1 percentage points (more than 550,000 people) in 2021, compared to the no-COVID scenario. The combination of poorer nutrition, limited health services, learning losses from school closures, and the likelihood that some children (particularly adolescent girls and children from poor households) may never return to school because of the COVID-19 have the potential to threaten decades of progress in Human capital development.
Last Updated: Mar 19, 2021