Country information

Economy

Rwanda began to reform its economy in 1995. The reforms have focused on the exchange and trade regime, the privatization of some state enterprises, the reform of public administration, the budget and financial management, and private sector development. Rwanda completed its Poverty Reduction Strategy Paper (PRSP) in June 2002. The contribution of the private sector to the economy and poverty alleviation remains very limited (there are 170 enterprises in Rwanda, only 75 have more than 50 staff). Private sector development remains hampered mainly by the perceived high political risks and by the high cost of doing business due to expensive transport, communications, and utilities.

Over ninety percent of the Rwandans (97 percent of women, 86 percent of men) rely on subsistence agriculture, with very limited participation in the exchange economy. Productivity is low, and production covers only 80 percent of Rwanda's food needs. The international prices of the two major agricultural export commodities, coffee and tea, have declined since the late 1980s. Economic growth and social changes are severely constrained by the shortage of skilled people. Rwanda is making significant investments to make up for the losses, but about 1 millions youths are unskilled, a problem with important economic and socio-political dimensions.

Between 1994 and 1997, the economy grew by 70 percent and economic growth remained relatively high (between 6 and 9 percent) for the following year and inflation low (3.4 percent in 2001). But it took until 2000 for the GDP to return to its 1990 level. In the aftermath of the genocide, growth was led by manufacturing, commerce, and services spurred by the presence of a large number of international NGOs and relief agencies. In the following years, the Government implemented a broad program of policy and institutional reforms including such measure as rationalizing the tax system, introducing VAT, improving expenditure management, removing ghost workers from public service payroll, launching a privatization program, granting independence to the Central Bank, liberalizing the exchange rate and most prices, initiating a financial sector reform, and reducing tariffs. Agriculture (42 percent of GDP) and construction have been the main sources of growth. Rwanda reached its Heavily Indebted Poor Countries (HIPC) Initiative Decision Point in December 2000, which helped alleviate the burden of a substantial external debt.

While the Rwandans' economic situation has been slowly improving since 1994, most Rwandans are worse off today than in the late 1980s, particularly in rural areas. In 2002, there was about 41 percent of the population who did not have access to potable water and in 2000 the infant mortality per 1,000 was 107. According to different NGOs' reports, as a consequence of the genocide, many people are particularly vulnerable. One third of the households are headed by a woman. One million children which is 12 percent of the total population are orphans and are cared for by impoverished family or community networks.