Twenty-two years ago Rwanda was on its knees, the economy was a wreck with most facilities and services non-existent in the aftermath of the 1994 Genocide against the Tutsi. Economists, historians and theorists wrote off the country and predicted it would only recover within four decades. 

But like the proverbial phoenix that rose from its ashes, Rwanda has beaten bookmakers, theorists and economists to put the economy back on the track and even performed far better than many other economies around the world in under two decades.

The country that experienced negative growth during and after the Genocide that left over one million people dead and thousands more displaced, is today one of the fastest growing economies in the world. From negative growth of -11.4 per cent in 1994 to 7 per cent in 2014 and 6.9 per cent in 2015, Rwanda has proved everyone wrong, especially those that let it down in its time of need, or wrote it off as a basket case. This miraculous feat and resilience could be explained in many ways, but it mostly has a lot to do with the fighting spirit and the belief in self-reliance that drive most of the initiatives that have seen the country become a rising star on the continent.

Renaissance

A look at some of the milestones since the end of the Genocide that marked the beginning of the country’s renaissance and transformation is a remarkable success story.

With the economy growing at an annual average rate of 8 per cent for the period of 10 years ending 2012, a time when conspiracy experts believed Rwanda would be on a begging spree across western capitals, the economy has expanded by close to 6.5 per cent on average between 2013 and 2015. This together with the earlier growth rate averaging 8 per cent have been among the highest across the continent and globally.

This performance has been anchored on strong economic fundamentals and policies, as well as programmes that promote inclusive development, especially at the grassroots level.

These initiatives have helped reduce poverty levels to 39 per cent, with extreme poverty at 16.3 per cent, from 24.1 per cent in 2011, the Integrated Household Living Conditions Survey by the National Institute of Statistics of Rwanda (NISR) released in September last year indicates.

The country is also on track to creating 200,000 off-farm jobs annually by 2018 as per the Economic Development and Poverty Reduction Strategy (EDPRS II) (that builds on achievements of EDPRS I), and Vision 2020. These and other initiatives, like the crop intensification programme, have been the key drivers of the country’s development over the past two decades.

EDPRS II main objective is to put Rwanda on a higher growth trajectory, targeting to increase per capita income to over $1,200 by 2018 from just $644 in 2013, as well as achieving a middle-income status by 2020. It also targets to increase private sector investments to 15.4 per cent of the GDP, and to achieve 11.5 per cent growth rate per annum.

NISR director general Yusuf Murangwa says Rwanda has been able to register impressive growth due to strong performance of the services sector, industry and agriculture, among others.

The country’s GDP is currently estimated at Rwf5.837 trillion in 2015, up from Rwf5.395 trillion in 2014. It was less than Rwf50 billion in 1994. Murangwa said the service sector is contributing 47 per cent to the national GDP, agriculture adds 33 per cent, and 14 per cent is from the industrial sector.

Amb Claver Gatete, the Minister for Finance and Economic Planning, said these achievements are a result of hard work, commitment, political stability and good leadership, as well as a conducive business environment.

Foreign direct investments (FDIs) into the country have increased over time, thanks to the conducive business environment created in the past 22 years. FDIs were at $268 million in 2014 from $251 million in 2010.

All these have helped turn around the country’s fortunes, and Rwanda now funds 66 per cent of its budget unlike in the past where donor support was the major source of budget support. Domestic revenues have increased by over 50 per cent as the country inches closer to self–reliance.

Rwanda Revenue Authority collected Rwf871.4 billion in both tax and non-tax revenues last financial year, from Rwf782.5 billion the previous year. It has collected Rwf470.6 billion against a target of Rwf460.3 billion in the first six months this financial year.

Export promotion

Though exports have over the past months declined, government mooted a strategy to spur foreign exchange receipts and reduce the trade deficit gap. The country seeks to grow exports to 28 per cent annually by 2018 under EDPRS II.

Francois Kanimba, Minister for Trade and Industry, said strategies like establishment the export growth facility fund, and SME development programmes will help boost capacity and competitiveness of Rwanda’s export industry as well as rake in more forex revenues.

Power generation

Rwanda’s installed power generation capacity is currently at over 186MW, and 24 per cent of the population has access to electricity. Rwanda targets to generate 563MW by 2018 and connect 70 per cent of households to electricity by 2018 and ensure power for industrial use.

Financial inclusion

The financial sector continues to record impressive growth, improving access to development finance and financial services that have helped the country reduce poverty among the population and growth.

Presently, 5.2 million Rwandans are financially included, reflecting 89 per cent of adult population compared to government’s target of 80 per cent, according to FinScope Survey 2016 report. Rwanda’s banked population is at 26 per cent, up from 23 per cent in 2012, and less than 5 per cent 20 years ago. Also, 42 per cent Rwandans access financial services through non-bank institutions, up from 19 per cent in 2012, driven by agency and mobile banking initiatives.

John Rwangombwa, the central bank chief, attributes this to accommodative monetary policy implemented by the central bank.

The banking sector is stable and well capitalised with capital adequacy ratio at 22.5 per cent above 15 per cent central bank regulatory requirement. The capital market has registered steady growth with seven local and regional firms listed on the bourse. The market capitalisation of the Rwanda Stock Exchange is currently at Rwf2.8 trillion.

The sector is composed of 12 commercial banks, three microfinance banks, one development bank and one co-operative bank. There are 416 Umerenge SACCOs, and microfinance institutions.

business@newtimes.co.rw