Towards 2035: Rwanda’s Agricultural Overhaul for Inclusive and Sustainable Growth

Rwanda’s economy grew strongly in 2024, driven by agriculture, services, and industry, despite global challenges. However, unlocking the full potential of its agricultural sector through modernization, investment, and inclusive policies is key to achieving long-term, inclusive growth.

In 2024, Rwanda stood out as a beacon of economic resilience, registering a robust GDP growth of 8.9% despite a challenging global backdrop marked by geopolitical unrest, lingering effects of the COVID-19 pandemic, and outbreaks of diseases such as mpox and Marburg. This economic performance was highlighted in the latest Rwanda Economic Update, a collaborative effort between the World Bank, the Ministry of Finance and Economic Planning, and the Rwanda Agriculture and Animal Resources Development Board (RAB). Growth was propelled by a rebound in agriculture, a revitalized industrial base, and continued strength in the services sector, particularly in ICT, transport, trade, and hospitality. Inflation dropped significantly to an average of 4.8%, granting the National Bank of Rwanda space to ease monetary policy and support lending. Nonetheless, challenges persist. The current account deficit widened to 12.7% of GDP due to a dip in current transfers, even as exports rose by 21.7%. Imports continued to surpass exports, maintaining a chronic trade imbalance. Foreign direct investment rose by 28%, partially easing external pressures, though foreign reserves slightly declined. On the fiscal side, domestic revenue growth helped reduce the budget deficit to 4.8% of GDP, but debt is expected to peak at 80% of GDP in 2025 before gradually stabilizing.

Agriculture at the Heart of Structural Transformation

Agriculture remains a central pillar of Rwanda’s economy, contributing 27% to GDP and 36% to export revenues, while employing more than half of the country’s workforce. However, the sector is constrained by low productivity, underdeveloped value chains, and high vulnerability to climate shocks. Most of the agricultural labor force is stuck in low-wage, informal work, with 54% engaged in subsistence farming. A significant proportion of smallholders cultivate plots under 0.3 hectares, limiting their ability to generate income or achieve economies of scale. Mechanization is extremely limited, with only 0.8% of arable land cultivated using tractors. Irrigation is similarly sparse, covering just 6% of farmland, despite proven productivity gains. Fertilizer use, access to improved seeds, and cold chain infrastructure are improving, but progress remains uneven. Structural barriers such as low levels of formal education, lack of financial services, and weak integration with markets—hinder modernization. The sector’s vulnerability to floods, droughts, and soil degradation further constrains its contribution to national development.

PSTA5: A Blueprint for Agricultural Modernization

To address these challenges, the Rwandan government has launched the Fifth Strategic Plan for Agricultural Transformation (PSTA5), a comprehensive blueprint for transitioning agriculture from a state-led to a market-driven model. The strategy emphasizes private sector participation, expanded irrigation, smart subsidies, and improved land and water management. One major focus is reforming the seed sector by creating a more competitive, value chain-based system that encourages private investment and enables access to high-yield, climate-resilient varieties. Regulatory bottlenecks related to germplasm importation and registration are being targeted to accelerate innovation. The government is also pushing for better integration of smallholder farmers into value chains. The "Farming as a Business" model is now being rolled out through farmer training programs, showing early signs of success, although expansion depends on long-term financing. Structured value chains—such as those piloted through the Sustainable Agricultural Intensification and Food Security Project (SAIP) are helping farmers access quality inputs, technical advice, and stable markets, while stimulating private investment in agriculture.

Building Infrastructure and Finance to Unlock Growth

Rwanda’s agricultural transformation hinges on building modern infrastructure, particularly in post-harvest management and cold chain logistics. Investments in storage facilities, refrigerated transport, and food safety systems are essential to reduce post-harvest losses and enhance competitiveness in global markets. However, financing remains a bottleneck. Despite its economic importance, agriculture receives just 6% of total bank credit, and high non-performing loan ratios make lenders wary. While risk-sharing mechanisms like the National Agricultural Insurance Scheme (NAIS) and partial credit guarantees are in place, adoption is still low, with only 4% of farmers covered. Additionally, public spending on agricultural research and development is just 0.06% of agricultural GDP, well below international benchmarks. These gaps restrict innovation and limit farmers’ ability to adapt to changing climate and market conditions. Meanwhile, rising reliance on food imports makes Rwanda vulnerable to global price shocks. Although agricultural exports reached US$599 million in 2022, the country remains dependent on external food sources. Domestic food inflation peaked at 64% in late 2022, driven by import prices and climate-related disruptions such as floods and droughts.

Closing Gender Gaps for Inclusive Agricultural Growth

Gender inequality continues to weigh on the sector’s performance. Female-managed farms are, on average, 12% less productive than those led by men, due largely to disparities in access to land, credit, extension services, and technology. Women are underrepresented in irrigation user committees and agricultural cooperatives, which further limits their influence and access to resources. Addressing these inequities is essential not only for social inclusion but also for boosting national productivity. Policies that promote women’s participation in governance structures, increase access to gender-sensitive financial products, and expand female-focused training programs are critical for narrowing the productivity gap. In a country where women make up a significant share of the agricultural workforce, inclusive growth strategies are indispensable for achieving long-term development goals.

Rwanda’s ambition to become an upper-middle-income country by 2035 hinges on the transformation of its agricultural sector into a high-performing, inclusive, and resilient engine of economic growth. This transformation will depend on continued investment in education and training, market-driven value chains, robust post-harvest systems, climate-smart technologies, and a strong policy framework that attracts private investment. With land scarcity and a doubling of food demand expected by 2040, the key to success lies not in expanding acreage but in boosting productivity. The path forward is clearly mapped, but realizing this vision will require coordinated action, smart investment, and a steadfast commitment to inclusive, sustainable development.