Rwanda has recently enjoyed strong economic growth rates, creating new business prospects and lifting people out of poverty. Rwandans are generally living healthier and wealthier lives. But while poverty has fallen rapidly, more than 60% of the population still live on less than $1.25 a day.
The country is a geographically small with one of the highest population densities in sub-Saharan Africa. With one of the lowest urbanization rates in Africa, only about 8% of the population lives in towns and the majority of Rwandans are subsistence farmers.
Rwanda is an agricultural economy with no mineral or energy deposits. The country’s economy suffers from the aftereffects of the 1994 genocide, which exterminated almost 20% of the entire population. The 1994 genocide decimated Rwanda’s fragile economic base, severely impoverished the population, particularly women, and temporarily stalled the country’s ability to attract private and external investment.
However, Rwanda has made substantial progress in stabilizing and rehabilitating its economy well beyond pre-1994 levels. Its economy has undergone rapid industrialisation due to a successful governmental policy. Since the early-2000s, Rwanda has witnessed an economic boom improving the living standards of many Rwandans. The Government’s progressive visions have been the catalyst for the fast transforming economy.
Rwanda consistently ranks well for ease of doing business and transparency
In the World Bank’s ‘Doing Business’ report 2019, which describes how economically friendly the 190 countries in the world are, Rwanda ranks 29th – the second-best African nation after Mauritius. The country has reduced reliance on donations and currently, domestically funds about 84% of the budget is in 2019.
The last two decades on the Rwandan economic front have also been characterized by improving the investment ecosystem to create interest from the international and local business community.
While most would concentrate on the odds against the country, such as its small size, and its landlocked location, amidst a volatile region, Kagame sought to give investors every reason to put their money in Rwanda.
In a continent that has always been associated with corruption, the Rwandan government adopted a zero-tolerance stance on graft.
This was paired with the improvement of service delivery across all sectors, eliminating the need for bribes to access public services.
The country’s economic freedom score is 70.9, making its economy the 33rd freest in the 2020 Index. Its overall score has decreased by 0.2 points due to a drop in the government integrity score.
Many African economies are known for distinct exports or income streams that have remained unchanged for years. Rwanda chose a different path by embarking on a concerted effort to diversify exports and revenue streams. This approach has seen services become the leading driver of gross domestic product growth in the last three years, taking over from agriculture.
Also, diversification has been achieved, in part, through an increased focus on tourism, driven by initiatives such as the Meetings Incentives Conferences and Exhibitions (MICE) strategy which in less than five years placed Rwanda among the top conference destinations in Africa.
It was projected that in 2021 improvements in the business environment and investment in major growth sectors (mainly services and industry) will help the economy to recover and to record modest real GDP growth. Rwanda projects continued economic growth, which it hopes will bring it into the ranks of high-income countries by 2050.
The economy grew by 9.4 per cent in 2019 and was initially projected to grow by 8 per cent in 2020 and 2021
Economic growth will slow sharply, to 2.3%, in 2020, owing to declining foreign investment and the temporary closure of businesses. The new Coronavirus pandemic has had an unprecedented effect on Rwanda’s tourism, hospitality, and transport, sending the economy into shock. However, the country has secured $109.4 million credit from the International Monetary Fund and some $11 million debt relief from the same institution.
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