Small and landlocked, Rwanda is hilly and fertile with a population above 13 million people (2022). It borders the far larger and richer Democratic Republic of Congo, and East African neighbors, Tanzania, Uganda, and Burundi.
With the support of the International Monetary Fund and the World Bank, Rwanda has made important economic and structural reforms and sustained steady economic growth rates for over a decade until COVID-19 and its impact threatened to reverse the trend.
Rwanda has guarded its political stability since the 1994 genocide against the Tutsi. Parliamentary elections in September 2018 saw women fill 61% of seats, the Rwandan Patriotic Front maintain an absolute majority, and two opposition parties, the Democratic Green Party of Rwanda and Social Party, Imberakuri, win two seats each. President Paul Kagame was re-elected for a seven-year term in August 2018, after an amendment to the constitution allowed him to run for a third term.
Rwanda now aspires to Middle Income Country status by 2035 and High-Income Country status by 2050. It plans to achieve this through a series of seven-year National Strategies for Transformation (NST1), underpinned by sectoral strategies focused on meeting the UN’s Sustainable Development Goals (SDGs).
The NST1 followed two, five-year Economic Development and Poverty Reduction Strategies (EDPRS) (2008–12) and EDPRS-2 (2013–18), during which Rwanda experienced robust economic and social performance. Growth averaged 7.2% a year over the decade to 2019, while per capita gross domestic product (GDP) grew at 5%.
Strong economic growth was accompanied by substantial improvements in living standards. Rwanda was one of two countries in Sub-Saharan Africa that achieved all the health Millennium Development Goals (MDGs): Under-five mortality declined sharply between 2000 and 2020 and the maternal mortality ratio also dropped, as did the total fertility rate (from an increase in access to modern contraception). A strong focus on homegrown policies and initiatives has contributed to significant improvement in access to services and human development indicators.
The economy showed resilience despite a challenging economic environment in 2022. After a strong rebound in 2021 from the COVID-19 induced-contraction in the preceding year, the economy faced multiple challenges in 2022—pandemic scars, headwinds from the war in Ukraine, climate-related shocks, and mounting inflationary pressures. Despite these challenges, real GDP grew by 8.2% in 2022.
Rwanda’s public-sector-led development model has shown its limitations, with public debt increasing significantly in recent years. The country’s heavy reliance on large public investments (at 13% of GDP in 2019) has led to substantial fiscal deficits, financed through external borrowing. Consequently, the debt-to-GDP ratio rose to 56.7% in 2019 (from 19.4% in 2010) and was estimated to have reached 71% of GDP in 2020, following an increase in borrowing needs due to the pandemic. External financing through grants and concessional and non-concessional borrowing, has played a key role in financing public investments. Going forward, the private sector looks set to play a bigger role in helping to ensure economic growth. Low domestic savings, a shortage of 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 rates and accelerate growth. Promoting domestic savings is viewed as critical, along with inclusive growth.
Inclusive growth remains a key challenge, as the poverty reduction momentum has weakened in recent years. In terms of the international poverty line of $2.15 (2017 PPP), the poverty rate declined from 75.2% to 53.5% over 2000 to 2013 and became almost stagnant. In 2016, it was 52%. This poverty reduction slowdown is explained by compressed household consumption in rural areas, due in part to a slow rural to urban transition.
Addressing the above challenges will require continued efforts in improving the quality of infrastructure (water and electricity), and essential basic services (education, health, and social safety nets), and providing effective support for entrepreneurship and private-sector job creation. The World Bank’s Human Capital Index (HCI) scores Rwanda at 0.38, slightly higher than the average for low-income countries but lower than the average for Sub-Saharan Africa.
Last Updated: Sep 21, 2023