Rwanda among fast growing economies on the continent, International Development Expert
Rwanda is among the thirteen African countries that are set to grow rapidly according to the World Bank Group’s latest 2015 Global Economic Prospects report released this June.
The report shows that Rwanda’s economy will grow each year at a rate of 7.12 percent between fiscal years 2014-2017 and in 2016 the growth will be at 7.0 percent while in 2017 at 7.5 percent.
With a Gross Domestic Product (GPD) at current market prices increased by Rwf1.377 trillion, up from Rwf1.282 trillion in the same quarter of 2014, Rwanda’s economy grew by 7.6 per cent in the first quarter of 2015, up from 7 per cent in the same quarter of 2014, according to the National Institute of Statistics of Rwanda (NSIR).
Rwanda has unveiled an ambitious budget this year and the country plans to wean itself off foreign aid it as it works toward its vision 2020 development goals as stipulated in the 2ndEconomic Development Strategy Papers (EDPRS2).
The Rwandan government says it will finance 66 per cent of its Rwf1768.2 trillion budget for 2015/2016 using domestic resources meaning Rwf1174.2 billion must be sourced from within the economy; that’s an increase of Rwf41.6 billion compared to the domestic revenues for the current fiscal year.
External resources which include loans and grants will only contribute Rwf594 billion or 34 per cent of the total budget, representing a reduction of Rwf35.8 billion.
Grants (which may include money from development agencies such as International Fund for Agricultural Development-IFAD) will contribute Rwf 358.4 billion, indicating a reduction of Rwf58.8 billion but money from grants account for 20 per cent of the total external support.
“Developing countries were an engine of global growth following the financial crisis, but now they face a more difficult economic environment,” said World Bank Group President Jim Yong Kim.
Kim said that countries that invest in education and health, improve the business environment, and create jobs through upgrades in infrastructure will emerge much stronger in the years ahead. “These kinds of investments will help hundreds of millions of people lift themselves out of poverty.”
Rwanda is working to overcome the horrors of its 1994 genocide. Its economy is today fast-growing and it has very little corruption.
The Rwanda Government’s role in creating a conducive business environment continues to attract more investors and is reflected in the country’s globally improving rankings including the most competitive economy in the East African region.
“Rwanda’s impressive business rankings are a result of a variety of different policies and reforms that the government has put in place in the economic arena and beyond. This means that Rwanda’s competitiveness improvement is based on steady and sustained progress of numerous indicators. This can be seen across the different global reports that rank Rwanda,” Francis Gatare, the Chief Executive Officer Rwanda Development Board said.
At least 1 million Rwandans have been lifted out of poverty in just five years, according to the Rwandan Household Living Conditions Survey, released by the government earlier this year.
Economic growth between 2006 and 2011 reduced the number of Rwanda's 11 million people living in poverty from 57 to 45 percent, according to the report.
International development expert, Paul Collier, author of "The Bottom Billion," called the Rwandan statistics “deeply impressive” and said that Rwanda had pulled off a rare “hat trick” of rapid growth, sharp poverty reduction and reduced inequality.
“This should be happening everywhere in Africa,” Collier said, at the release of the report. "Instead, it’s happening nowhere else."
Development indicators tell a story of significant changes in education, public health and the economy – Rwandans are living longer and are better off economically than 20 years ago.
Rwanda's infrastructure grew rapidly, with connections to electricity jumping from 91,000 in 2006 to 215,000 in 2011, according to government statistics. Access to education improved sharply with primary school completion rates for 2011 reaching 79 percent for boys and 82 percent for girls, much higher than the overall targets of 59 percent and 58 percent respectively, while participation in secondary level education doubled from 2006 to 2011.
Despite the setback caused by the 1994 genocide, Rwanda has spared no efforts to bring its economy back on track. Rwanda's exports remained dominated by traditional products such as coffee, tea and minerals like tin, coltan, wolfram and cassiterite. Rwanda's main exports partners are China, Germany and United States. Rwanda imports mainly food products, machinery and equipment, construction materials, petroleum products and fertilizers.
The strong growth in the industry sector was largely driven by the expansion in the construction sector. This sector recorded significant improvement in regulations, as observed in the World Bank‘s 2014 Doing Business report. Tourism continues to be an extremely strong sector in the Rwandan economy. Tourism receipts increased by 13 percent to USD 296.4 million between FY 2012-13 and FY2011-12. Overall numbers of visitors to the country increased by 16 per cent between the two fiscal years.
Embedding domestic firms into global value chains (GVCs) is a priority for government and is viewed as a key vehicle for promoting export growth and diversification and contributing to the broader goal of achieving a private-sector-led economy by 2020. The potential for linking national value chains (NVCs) with GVCs exists in several industries, including exports (especially coffee, tea and minerals), food processing, dairy and beverages, ICT and Business Process Outsourcing (BPO). Most of the current value chain activities are upstream, focusing on the development and supply of primary and intermediate inputs to export markets.
Export earnings increased by an estimated 33% in 2013 compared to the previous year on the back of increased coffee and tea production and favorable prices for key mineral exports, particularly coltan and cassiterite. GDP growth is projected to have increased from 4.6% in 2013 to 7% in 2014. The key growth drivers in the short and medium term include recovery in the services sector, increased productivity in the agriculture sector and the sustained implementation of the public investment programme.
According to World Bank recent report, Investments in mining in the past few years and favorable international commodity prices contributed to the sharp increase in mineral exports, which accounted for 40 percent of the total goods exports in 2013. “The lagged effect of the aid shortfall to the economy was extended to the second half of 2013, decelerating both public and private sector activities. However, signs of recovery are evident in 2014. In addition to GDP growth rates, turnovers of services and industries have been picking up. Therefore, we are hopeful that the growth in 2014 will be higher than that in 2013” said Toru Nishiuchi, World Bank Economist and co-author of the report.
Despite the current small-scale nature, the mining sector has potential to contribute to national development. According to the report, which has a special section on mining, the production capacity of the landlocked country’s mining sector has progressively increased, with export earnings in 2013 reaching US$225 million.
“Going forward, Rwanda needs to transform its economy from being aid dependent, public sector led, and domestic demand driven, to being self-reliant, private sector led, and net export led through addressing constraints to private sector investment such as energy and transport. In this regard, public investment will focus more on how to leverage private sector investment,” said Toru Nishiuchi, World Bank Group Senior Economist.