With regard to political stability, civil liberties, and political rights, Rwanda has come a long way from the genocide of the mid-1990s. Since the mid-1990s, the Government has focused on the 4Rs, namely reconciliation, reform, reconstruction, and regional stability. Reconciliation has enabled the return of peace and economic revival. Political and economic reforms have attracted support from the donor community, enabled reconstruction and increased social services while regional stability has been important for Rwanda’s trade and economic links with the rest of the region.

Growth and Growth Drivers

Rwanda’s economy grew annually by 10% between 1995 and 2002, due to reconstruction activity and structural reforms, but by an average of 5% since then. Growth was estimated at above 7% in 2007, with similar levels projected in the medium-term. There has been some export diversification in recent years, with minerals assuming an important share (about 30%) of the total. Still, infrastructure gaps, notably energy and transport, continue to impose medium-term constraints on economic growth. The Government has been innovative in pursuing the modernization of the economy. Skills development is a priority as well as use of ICT and expansion of financial services. Land reform has also featured prominently in the recent policy debate.

The economy has been resilient in the face of the shocks emanating from the post-election violence in Kenya and the disruptions in trade. Aid inflows, FDI, and remittances have risen as a result of reforms and improved economic conditions. Exports have increased but from a low base. FDI inflows remain below the Sub-Saharan Africa average. However, Rwanda receives more aid per capita than its neighbors.

Agriculture accounts for 44% of GDP. Its growth rate reached 12% in the early 2000s but has since stagnated. By May 2008, food production had increased by 14% over a similar period in 2007. Industry, including manufacturing and mining, accounts for some 7% of GDP. Manufacturing accounts for approximately 6 percent of GDP and saw a 10 percent annual growth rate in the last three years. Manufacturers target mainly the domestic market.

Macroeconomic Management

Although inflation has been relatively low since 2000, with some volatility, it rose from less than 1% in 2003 to 12% in 2006. Core inflation has been more stable, ranging between 5-7%.  In recent years, Rwanda financed its fiscal deficit from grants of over 12% of GDP.

Rwanda’s export revenues tripled between 2003 and 2007 to US$170 million, while the share of traditional exports, coffee and tea, declined to about 50%. Mineral exports, including coltan, cassiterite, and wolfram, saw a steep rise to 35% of export earnings in 2007. Imports, comprising mainly intermediate goods and energy (petroleum products account for 25% of total imports), rose more than two-fold to US$571 million. The current account deficit is financed by aid, FDI, concessional loans and remittances.

Rwanda’s external debt declined by 54% of GDP within one year to only 17% of GDP by 2006, a direct result of the Multilateral Debt Relief Initiative (MDRI). Total debt relief amounted to US$1,226.6 million. The remaining debt of US$477 million represents a debt-to-exports ratio (in Net Present Value terms) of 54%, compared to more than 100% for some other Sub-Saharan countries. However, a Debt Sustainability Analysis (DSA), conducted by the IMF and World Bank in 2007, indicated that Rwanda remains at risk of debt distress because of its limited export base.

To compete at the level of efficiency–driven economies, Rwanda will require “efficiency enhancers” in a range of areas. The country’s emphasis on education in science and technology is impressive. It has reached a level of “technological readiness” comparable to, or better, than that of its neighbors. The domestic market is small, however, and other attributes of an efficiency-driven economy, labor and goods market efficiency, will take time to develop. In this regard, membership of the East African Community is a good complement.

Rwanda is on track to meet all targets under MDG 2 (universal primary education), MDG 3 (promote gender equality), MDG 4 (reduce child mortality) and parts of MDG 6 (combat AIDS, malaria and other diseases). It is also likely to achieve MDG 7 (ensure environmental sustainability). However, meeting the MDGs on income poverty, inequality, access to basic infrastructure services, and malnutrition will be a major challenge.

Governance

The Rwandan Government has a policy of zero tolerance for corruption and allegations regarding public officials are routinely investigated and brought to the courts. Rwanda ranks better than its neighbors in Transparency International’s Corruption Perception Index, as well as on the Ibrahim Index of African Governance. A Joint Governance Assessment (JGA), by the Rwandan Government and donors, has noted that progress has been made, but recognizes that much more needs to be done, especially with regard to the strengthening of public institutions. A recent AfDB Group Governance Profile of the country reached similar conclusions. To foster and monitor good governance, a number of institutions have been created. Recent legal reforms include the abolition of the death penalty and introduction of the writ of habeas corpus.

Gender Issues

A recent Bank Group Gender Profile of Rwanda indicates that the country has achieved notable gains with regard to gender issues.  However, women’s participation in formal employment remains low. In the public sector, where women are better represented, their share of total employment is about 35%.

Bank Group Activities

The Bank Group’s current portfolio comprises 13 active operations for a total commitment value of UA180.9 million, out of which UA93.6 million, representing 51.7%, has been disbursed.
The Board of Directors of the African Development Bank approved a new Country Strategy Paper (CSP) 2008-2011 for Rwanda on 6 November 2008. The CSP aims to support Government’s Economic Development and Poverty Reduction Strategy (EDPRS) through two pillars: (i) economic infrastructure and (ii) competitiveness and enterprise development. The CSP proposes a threefold approach to delivering Bank assistance to Rwanda; first, through analytical work and advisory services in conjunction with Government and other Development Partners; second, support to capacity building efforts in Government; and third, through lending activities.

The African Development Fund’s ADF XI allocation to Rwanda is UA98.6 million. It will also benefit form the Bank Group’s regional operations window. The indicative lending program for 2008-2011 will include support to science and technology, enterprise development, budget support, and a range of private sector and regional operations, with emphasis on economic infrastructure (Pillar I).  This is reinforced by regional programs focused on transport infrastructure, ICT, energy, water and sanitation, agriculture, and a number of lines of credit through regional development banks. These operations will be designed to foster greater competitiveness (Pillar II).