Rwanda has moved from obscurity to one of the fastest growing economies in Africa since the 1994 Genocide against the Tutsi, which left over a million lives lost and totally destructed the entire economic system.

After the genocide, the country’s economy was on its knees with many Rwandans living in poverty. This situation has, however, changed significantly, thanks to radical reforms implemented by the government.

In 2000, the ambitious Vision 2020 was launched, seeking to transform Rwanda into a middle-income country by 2020. With the economy, characterised by internal and external macroeconomic instability, coupled with high unemployment and poverty rates as well as low investment rates, this vision seemed like a tall order at the time.

However, this long-term development plan met and exceeded many of its set targets, including poverty reduction, life expectancy and gross domestic product (GDP) growth, among others.

ALSO READ: 2024: Rwanda to lead economic growth in East Africa – UN report

GDP growth

"Rwanda&039;s economy experienced significant growth, expanding from approximately 753.6 million USD in 1994 to 14.1 billion USD in 2023, marking a remarkable increase of 19 times its 1994 level. This growth was sustained at an annual rate of 9 per cent," Ivan Murenzi, Director General at the National Institute of Statistics of Rwanda (NISR), told The New Times.

Over the same period, the country registered one of the highest growth rates in Sub-Saharan Africa.

Recent statistics released by the NISR show that in quarter one of 2024, GDP growth stood at 9.7 per cent driven by a strong performance in the services, industry, and agriculture sectors.

Rwanda made a deliberate decision to diversify its economy, reducing over reliance on the agriculture sector.

Between 1994 and 1999, the agriculture sector was the main source of growth, accounting for about 35 per cent of the economy in terms of share, according to NISR.

"This has, however, evolved over the years, with the services sector taking the lead at 44%, while agriculture now accounts for 27% of the economy,” Murenzi said.

The country is also positioning itself as a hub for finance, logistics and technology.

ALSO READ: The Journey to vision2020

FDI

Rwanda has been deliberate about creating a business-friendly environment for both local and foreign investors, making the country attractive for foreign direct investment (FDI).

The latest annual report by Rwanda Development Board shows that 513 projects worth $2.47 billion were registered in 2023, representing a 50 per cent increase compared to what was registered in 2022.

The government of Rwanda has also invested heavily in the ‘Visit Rwanda,’ brand which has seen the country attract a significant number of tourists boosting both luxury and business tourism.

Many other reforms including the enactment of a new investment code, introduction of tax incentives and establishment of a business-friendly environment saw the country ranked among the top countries in doing business in the region.

ALSO READ: Unpacking Rwanda’s vision 2050

Rwanda’s economic transformation journey has faced a number of headwinds.

"As a landlocked country, exports and imports have been quite costly for Rwanda, putting the country at a negative comparative advantage,” Teddy Kaberuka, an economic analyst and Partner at Centrix Group said.

"Additionally, external factors like the 2008-2009 global financial crisis, rising fuel prices as well as the Covid-19 pandemic all negatively impacted Rwanda’s growth momentum,” he added.

Rwanda has historically had a largely public sector-led development model with the government doing the heavy lifting as far as investments are concerned. This has had implications on the country’s debt.

"A private sector-led economy is the ideal, but given Rwanda’s history where the size of the private sector was almost negligible, the government was forced to take the lead and make heavy investments especially for infrastructure development and creating pace for production and a push for private sector growth,” Kaberuka said.

This, he added, came at a price which is debt.

ALSO READ: What will drive economic growth in 2024?

The private sector has grown significantly. The country’s domestic revenues are a testament to this.

Kaberuka quoted statistics which show that domestic revenues have grown from 30 per cent ten years ago to the current 68 per cent, indicating that the private sector is growing.

While vision 2020 mainly focused on recovery after the tragic aftermath of the 1994 genocide against the Tutsi, Vision 2050 is the next phase of the country’s long-term development and transformation, as it aspires towards self-reliance.

Rwanda is pushing to reach upper middle-income status in 2035 and high-income status in 2050.