Rwandan Economy: The Rising Phoenix

Prior to the pandemic, Rwanda had been experiencing a steady improvement in its economy, with a sudden and unexpected growth rate of 9.4% just in 2019, one of the highest in Africa and in the world.


Yashika SinghYashika Singh | Updated: 19-07-2021 09:21 IST | Created: 19-07-2021 00:05 IST
Rwandan Economy: The Rising Phoenix
Image Credit: https://thecommonwealth.org

Small country with big dreams

Rwanda has come a long way, recovering from the massive economic impact of the genocide in a very short span of time, with the government showing unexpected resilience in the face of this national crisis. It has launched a series of measures to arrest the dwindling economy, and the positive effects are quite palpable at ground level.

Rwanda, one of the smallest countries in the African continent (approximately 26,000 km sq. in the area), is surrounded by Uganda, Tanzania, Burundi, and the Democratic Republic of the Congo. Though it is a landlocked country, it has plenty of natural rivers throughout its states. It is highly elevated and is dominated by mountains in the west and the savannah to the east. It is located a little south of the Equator, and has a temperate to subtropical climate. It has been a constitutional republic since gaining independence from Belgium in 1962, and follows a parliamentary form of government. Kigali is the largest city and the capital of Rwanda. The official languages include English, French, Kinyarwanda, and Swahili. It is the most densely populated country in the African mainland, with an estimated population of 12,400,000 people, and a density of 470 persons/km sq. There are two main ethnic groups in Rwanda - the Tutsi, and the Hutu.

Bouncing back from genocide

Rwanda has a very violent history, with a very recent genocide. This genocide began in 1959, when the Hutus, who make up 85% of the population, violently overthrew the Tutsis, who had ruled the land and exploited the Hutus since the beginning of Rwanda. To escape from the war and torture inflicted by the Hutus, thousands of Tutsis fled to the neighbouring countries. In the late 1980s, the Ugandan Tutsis, supported by the current Rwandan president, formed the RPF (Rwandan Patriotic Front). RPF invaded Kigali in 1990, but signed a peace treaty with the then-president in 1993. In 1994, the president's plane was shot down, and the Hutus blamed the Tutsis and declared war. This sparked the genocide that killed more than 800,000 people in just 100 days.

The genocide greatly affected Rwanda's economy. The Gross Domestic Production went down by 50.2% (World Bank, GDP), and the life expectancy rate went down from 51 years in 1983 to 26 years in 1993 (World Bank, Life Expectancy rates). However, there was a steep rise in the GDP, almost 50%, in just the next one year. Ever since then, Rwanda's economy had been improving in various sectors.

Key economic planks

The country has very few natural resources, with the economy mainly based on subsistence agriculture. Rwanda has a few deposits of gold, tin ore, tungsten ore, and methane. However, the government has not invested a lot in their exploitation since this would require a lot of investments and foreign partnerships for the minerals to be of greater value to the country.

The Rwandan government has made efforts to promote private sector development, even establishing a Private Sector Federation (PSF). It is a professional organization, dedicated to encourage and represent the interests of the Rwandan business community that groups ten professional chambers, and was set up in December, 1999. According to the World Bank Report, Rwanda's public-sector led development model has presented various flaws, as public debt has increased significantly in recent years. (Rwanda - Statisticals Economy, Actualitix.com) Significant resources are being allotted to human resources development by organizing various short-term training seminars and workshops for various vocational courses. However, Rwanda's improvement and growth plan relies alarmingly on public investments.

Other than a sudden drop in 2008, Rwanda's employment rates rose in a steady pattern till 2013, after which there has been a steep decline. If we talk specifically about 2020, despite the pandemic, the employment rates rose from 43 percent in the second quarter to 48.90 percent in the third quarter of 2020.

Rwanda is one of the fastest growing African countries in ICT with internet penetration at 26 per cent in January 2020. There are several avenues for growth for the ICT sector – from e-commerce and e-services, mobile technologies, applications development and automation to becoming a regional centre for the training of top quality ICT professionals and research.

There are three main measures taken by the government to boost the economy. The first is the Economic Development and Poverty Reduction Strategies (EDPRS). This included two phases, from 2008 to 2013, and from 2013 to 2018. EDPRS focused on reducing poverty and income inequality between households, and was quite successful in achieving this. The second is the Girinka program. Since the majority of the population is farmers, the government decided to give one cow to each family, who could sell the dairy products and milk, as well as overcome malnutrition. The third, and the last measure, Savings and Credits Cooperatives (SACCOs), aims to promote financial inclusion. It was started in 2008, and became extremely popular in rural areas where big commercial banks were often inaccessible.

NGOs and other organisations have also encouraged the people of Rwanda to help out in their own way. There is now a popular tradition all over Rwanda, called Umuganda (which means community work) where the people gather in their local areas for community work on the last Saturday of the month. This includes building houses for the homeless, cutting weeds, and helping in the construction of roads, bridges, schools, hospitals and other such structures in the area. Every person who is physically capable is expected to show up and help out the community.

However, despite all these improvements, Rwanda is still lacking in many ways. There are hardly any natural resources, and no steps are being taken to use those that are available. The urbanisation rate is 8 percent, and people are mainly involved in coffee and tea plantations. These crops also result in reduced soil fertility.

Playing in pandemic

Prior to the pandemic, Rwanda had been experiencing a steady improvement in its economy, with a sudden and unexpected growth rate of 9.4% just in 2019, one of the highest in Africa and in the world. However, the negative impact of the pandemic has also dampened the performance and growth due to both reduction of global and domestic demand, as well as disruptions in supply. The external sector is the most affected in Rwanda, with a substantial drop in revenue through trade, and countless small businesses closing down. This will also have a major impact on Kigali districts through increased vulnerabilities and job losses, where most households are employed in non-agricultural sectors. The current pandemic will also influence the debt situation in the country, as the debt is likely to increase after 2021. However, the country has successfully brought the situation under control to a large extent, handling the cases even better than cities of developed countries, like Ohio. While many countries are having trouble in getting their citizens tested, Rwanda's officials offer services to random passersby, and delivering extremely quick results by using pool testing.

Tackling the challenges

The combination of poor nutrition and health services, lack of investments in profitable natural resources, and the likelihood of children from poor households not receiving proper education, and therefore, not getting adequate job opportunities, can prove to be a threat to decades of progress in Rwanda's development, and in turn its economy. Rwanda's government has been coming up with new schemes and working out ways to reduce poverty, all of which is evident in the statistics. The country has also been able to overcome the pandemic and avert a possibly major crisis, but it needs to take more drastic steps to make a difference, and be able to stand at level with other big economies.

(Disclaimer: The opinions expressed are the personal views of the author. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)

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