Rwanda is a rural country with about 90% of the population engaged in
agriculture. It is the most densely populated country in Africa; is
landlocked; and has few natural resources and minimal industry. Primary
exports are coffee and tea. By 1994, farm size, on average, was smaller than
one hectare, while population density was more than 450 persons per square
kilometer of arable land. The Rwandan economy is based on the
largely rain-fed agricultural production of small, semi-subsistence, and
increasingly fragmented farms. It has few natural resources to exploit and a
small, noncompetitive industrial sector. While the production of coffee and tea
is well-suited to the small farms, steep slopes, and cool climates of Rwanda and
has ensured access to foreign exchange over the years, farm size continues to
decrease. Prewar population was growing at the
high rate of 3% a year. History
= Before the civil war and genocide = In the 1960s and 1970s, Rwanda's prudent
financial policies, coupled with generous external aid and relatively
favorable terms of trade, resulted in sustained growth in per capita income
and low inflation rates. However, when world coffee prices fell sharply in the
1980s, growth became erratic. Compared to an annual GDP growth rate of
6.5% from 1973 to 1980, growth slowed to an average of 2.9% a year from 1980
through 1985 and was stagnant from 1986 to 1990. The crisis peaked in 1990 when
the first measures of an IMF structural adjustment program were carried out.
While the program was not fully implemented before the war, key measures
such as two large devaluations and the removal of official prices were enacted.
The consequences on salaries and purchasing power were rapid and
dramatic. This crisis particularly affected the educated elite, most of
whom were employed in civil service or state-owned enterprises.
During the 5 years of civil war that culminated in the 1994 genocide, GDP
declined in 3 out of 5 years, posting a dramatic decline at more than 40% in
1994, the year of the genocide. The 9% increase in real GDP for 1995, the first
postwar year, signaled the resurgence of economic activity.
= After the civil war and genocide = The 1994 genocide destroyed Rwanda's
fragile and economic base, severely impoverished the population,
particularly women, and eroded the country's ability to attract private and
external investment. However, Rwanda has made significant progress in stabilizing
and rehabilitating its economy. In June 1998, Rwanda signed an Enhanced
Structural Adjustment Facility with the International Monetary Fund. Rwanda has
also embarked upon an ambitious privatization program with the World
Bank. In the immediate postwar period—mid-1994
through 1995—emergency humanitarian assistance of more than $307.4 million
was largely directed to relief efforts in Rwanda and in the refugee camps in
neighboring countries where Rwandans fled during the war. In 1996,
humanitarian relief aid began to shift to reconstruction and development
assistance. The United States, Belgium, Germany, the
Netherlands, France, the People's Republic of China, the World Bank, the
UN Development Programme and the European Development Fund will continue
to account for the substantial aid. Rehabilitation of government
infrastructure, in particular the justice system, was an international
priority, as well as the continued repair and expansion of infrastructure,
health facilities, and schools. After the Rwandan Genocide, the
Tutsi-led government began a major program to improve the country's economy
and reduce its dependence on subsistence farming. The failing economy had been a
major factor behind the genocide, as was overpopulation and the resulting
competition for scarce farmland and other resources. The government focused
primarily on building up its manufacturing and service industries and
eliminating barriers to trade and development.
The Government of Rwanda posted a 13% GDP growth rate in 1996 through improved
collection of tax revenues, accelerated privatization of state enterprises to
stop the drain on government resources, and continued improvement in export crop
and food production. Tea plantations and factories continue to be rehabilitated,
and coffee, always a smallholder's crop, is being more seriously rehabilitated
and tended as the farmers' sense of security returns. However, the road to
recovery will be slow. Coffee production of 14,578,560 tons in
2000 compares to a pre-civil war variation between 35,000 and 40,000
tons. By 2002 tea became Rwanda’s largest export, with export earnings
from tea reaching US$18 million equating to 15,000 tons of dried tea. Rwanda's
natural resources are limited. A small mineral industry provides about 5% of
foreign exchange earnings. Concentrates of the heavy minerals cassiterite, and
coltan(used to manufacture electronic capacitors, used in consumer electronics
products such as cell phones, DVD players, video game systems and
computers). By mid-1997, up to 75% of the factories
functioning before the war had returned to production, at an average of 75% of
their capacity. Investments in the industrial sector continue to mostly be
limited to the repair of existing industrial plants. Retail trade,
devastated by the war, has revived quickly, with many new small businesses
established by Rwandan returnees from Uganda, Burundi, and the Democratic
Republic of the Congo. Industry received little external
assistance from the end of the war through 1995. Beginning in 1996-97, the
government has become increasingly active in helping the industrial sector
to restore production through technical and financial assistance, including loan
guarantees, economic liberalization, and the privatization of state-owned
enterprises. In early 1998, the government set up a one-stop investment
promotion center and implemented a new investment code that created an enabling
environment for foreign and local investors. An autonomous revenue
authority also has begun operation, improving collections and
accountability. Cassiterite production peaked at 1,000
tonnes in 1990, but was under 700 tonnes in 2000. Recorded coltan production has
soared from 147 tonnes in 1999 to 1,300 tonnes in 2001, and coltan was the
country's biggest single export earner in 2001. It has been under-acknowledged
to date that at least part of the increase in production is because of new
mines opening up in Rwanda. However, it is also true, as has frequently been
observed, that the increase is because of the fraudulent re-export of Congolese
coltan. In addition to the well-publicised involvement in this
trade of the Rwandan Defence Force, another important factor in the coltan
re-export is that international dealers are under pressure not to buy from the
DRC, thus increasing the incentive for DRC coltan to be re-exported as
Rwanda's. Rwanda is also alleged to be trading in fraudulently exported gold
and diamonds from the DRC. = Current Economy and Economic Prospects
The country entered a high period of economic growth in 2006, and the
following year managed to register 8% economic growth, a record it has
sustained since, turning it into one of the fastest-growing economies in Africa.
This sustained economic growth has succeeded in reducing poverty, with
growth between 2006 and 2011 reducing the percentage of the country's
population living in poverty from 57% to 45%.The country's infrastructure has
also grown rapidly, with connections to electricity going from 91,000 in 2006 to
215,000 in 2011. Existing foreign investment is
concentrated in commercial establishments, mining, tea, coffee, and
tourism. Minimum wage and social security regulations are in force, and
the four prewar independent trade unions are back in operation. The largest
union, CESTRAR, was created as an organ of the government but became fully
independent with the political reforms introduced by the 1991 constitution. As
security in Rwanda improves, the country's nascent tourism sector shows
great potential to expand as a source of foreign exchange.
Agriculture and Primary resources In 2012 agriculture accounted for 33% of
the economy of Rwanda. Rwanda has long relied on coffee as a
cash crop. The crash of coffee prices in 1989 caused a great decrease in
purchasing power, and increased domestic tensions.
Rwanda's economy suffered heavily during the 1994 Genocide, with widespread loss
of life, failure to maintain the infrastructure, looting, and neglect of
important cash crops. This caused a large drop in GDP and destroyed the
country's ability to attract private and external investment. The economy has
since strengthened, with per-capita GDP estimated at $1,592 in 2013, compared
with $416 in 1994. Major export markets include China,
Germany, and the United States. The economy is managed by the central
National Bank of Rwanda and the currency is the Rwandan franc; in June 2010, the
exchange rate was 588 francs to the United States dollar. Rwanda joined the
East African Community in 2007 and there are plans for a common East African
shilling, which has been hoped to be in place by 2015.
Rwanda is a country of few natural resources, and the economy is based
mostly on subsistence agriculture by local farmers using simple tools. An
estimated 90% of the working population farms, and agriculture comprised an
estimated 42.1% of GDP in 2010. Since the mid-1980s, farm sizes and food
production have been decreasing, due in part to the resettlement of displaced
people. Despite Rwanda's fertile ecosystem, food production often does
not keep pace with population growth, and food imports are required.
Crops grown in the country include coffee, tea, pyrethrum, bananas, beans,
sorghum and potatoes. Coffee and tea are the major cash crops for export, with
the high altitudes, steep slopes and volcanic soils providing favourable
conditions. Reliance on agricultural exports makes Rwanda vulnerable to
shifts in their prices. Agricultural animals raised in Rwanda
include cows, goats, sheep, pigs, chicken, and rabbits, with geographical
variation in the numbers of each. Production systems are mostly
traditional, although there are a few intensive dairy farms around Kigali.
Shortages of land and water, insufficient and poor-quality feed, and
regular disease epidemics with insufficient veterinary services are
major constraints that restrict output. Fishing takes place on the country's
lakes, but stocks are very depleted, and live fish are being imported in an
attempt to revive the industry. Rwanda's mining industry is an important
contributor, generating US$93 million in 2008. Minerals mined include
cassiterite, wolframite, sapphires, gold, and coltan, which is used in the
manufacture of electronic and communication devices such as mobile
phones. Production of methane from Lake Kivu began in 1983, but to date has been
used only by the Bralirwa Brewery. = Energy and electrification =
Rwanda has made tremendous strides in improving electrification in the 21st
century. A great number of new areas has become electrified through an expansion
of infrastructure. Depletion of the forests will eventually
pressure Rwandans to turn to fuel sources other than charcoal for cooking
and heating. Given the abundance of mountain streams and lakes, the
potential for hydroelectric power is substantial. Rwanda is exploiting these
natural resources through joint hydroelectric projects with Burundi and
the Democratic Republic of the Congo. Industry
The industrial sector is small, contributing 16% of GDP in 2012.
Rwanda's manufacturing sector is dominated by the production of import
substitutes for internal consumption. The larger enterprises produce beer,
soft drinks, cigarettes, hoes, wheelbarrows, soap, mattresses, plastic
pipe, roofing materials, and bottled water. Other products manufactured
include agricultural products, small-scale beverages, soap, furniture,
shoes, cement, plastic goods, textiles and cigarettes.
Tourism and Services Rwanda's service sector suffered during
the late-2000s recession as banks reduced lending and foreign aid projects
and investment were reduced. The sector rebounded in 2010, becoming the
country's largest sector by economic output and contributing 43.6% of the
country's GDP. Key tertiary contributors include banking and finance, wholesale
and retail trade, hotels and restaurants, transport, storage,
communication, insurance, real estate, business services and public
administration including education and health.
Tourism is one of the fastest-growing economic resources and became the
country's leading foreign exchange earner in 2011. In spite of the
genocide's legacy, the country is increasingly perceived internationally
as a safe destination; The Directorate of Immigration and Emigration recorded
405,801 people visiting the country between January and June 2011; 16% of
these arrived from outside Africa. Revenue from tourism was US$115.6
million between January and June 2011; holidaymakers contributed 43% of this
revenue, despite being only 9% of the numbers.
Rwanda is one of only two countries in which mountain gorillas can be visited
safely; gorilla tracking, in the Volcanoes National Park, attracts
thousands of visitors per year, who are prepared to pay high prices for permits.
Other attractions include Nyungwe Forest, home to chimpanzees, Ruwenzori
colobus and other primates, the resorts of Lake Kivu, and Akagera, a small
savanna reserve in the east of the country.
Rwanda's tourism is centered on the attractions of Volcanoes National Park
with its six volcanoes and its protected population of mountain gorillas made
famous by Dian Fossey. Additionally, tourism is drawn to central Africa's
largest protected wetland Akagera National Park, with its populations of
hippopotami, cape buffalo, zebras, elephants, elands, and other big game
animals. Birdwatching-related tourism has a potential to develop as well,
especially in Nyungwe National Park, among the largest uncut forest reserves
in Africa. Nyungwe National Park is home to over 300 species of birds. And a vast
variety of wild life as well. Several memorial sites associated with
the Rwandan genocide have begun generate significant tourism. For example, the
Gisozi Genocide Memorial Site in the Gasabo District of Kigali—the burial
place of approximately 300,000 victims of the genocide—has a related genocide
exhibition area and library and has plans to develop a teaching center on
the history of the genocide. Another major genocide-related memorial center
attracting tourists is the Murambi Genocide Memorial Site housed in the
former Murambi Technical School where 45,000 were murdered and 850 skeletons
and mummified remains of the victims are on display.
Two other major memorial sites associated with the genocide are in
Kicukiro District: Rebero Genocide Memorial Site where 14,400 victims are
buried and the Nyanza-Kicukiro Genocide Memorial Site where 5,000 victims were
killed after Belgian soldiers who serving in the United Nations
peacekeeping forces abandoned them. In Kibungo Province, the site of the
Nyarubuye Massacre is home to the Nyarubuye Genocide Memorial Site where
an estimated 20,000 victims were killed after seeking refuge in the Roman
Catholic church and homes of the nuns and priest there.
See also Rwanda
Telecommunications in Rwanda Transport in Rwanda
General: Economy of Africa
References External links
Economy of Rwanda at DMOZ Pulitzer Center on Crisis Reporting
Rwanda Human Conflict and Environmental Consequences
Rwanda latest trade data on ITC Trade Map
World Bank Summary Trade Statistics Rwanda