Rwanda's economy shakes off a dark past, stays on growth path

New buildings and infrastructure have been constructed in the capital Kigali keeping with current international trends. Photo/Daniel Sabiiti 

By ALEX NGARAMBE Rwanda Today

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Twenty years after the Genocide against the Tutsi, Rwanda’s economic growth rate has been on an upward trend.

For the past eight years, in particular, the economy has averaged eight per cent growth rate annually save for last year where it declined to 6.5 per cent attributed to the aid cut by international donors.

Rwanda is targeting an economic growth rate of 11 per cent by 2017. From a per capita GDP at less than $200 twenty years ago to less than $1,000 today, Rwanda is targeting a middle income status of $1,200 by 2018.

Rwanda’s regional and international trade was at its lowest 20 years ago. Worse, the country was not only aid dependent but also consuming imports.

Trade experts say that government can only increase its trade revenues if it diversifies its exports, which have remained the same over the past two decades.

“Rwanda’s trade basket in terms of exports has remained the same despite increased revenues,” said Armin Lalui, a trade expert with Trade Mark East Africa Rwanda office.

The country’s exports growth rate for the past 10 years has been at 20 per cent annually driven mainly by traditional exports.

Of the total exports, Rwanda exports 15 per cent to DRC and Burundi, a big achievement. The country has increased exports in manufacturing and agro-processing, targeting 14 per cent annual growth in manufacturing by 2020.

“Diversification into the service sector with quality products to penetrate the EAC market would be important for the Rwandan economy,” added Mr Lalui.

Although aid dependence for Rwanda is still high at 40 per cent, the government has reduced Official Development Assistance from 96 per cent in 1994. This is attributed to economic reforms that have been put in place.

Twenty years ago, Rwanda’s cross-border trade was mainly between Burundi and the Democratic Republic of Congo (Zaire) – countries which were also not doing well in terms of economic development. It was against government policy for Rwanda to carry out trade with regional countries particularly Uganda which sheltered Rwandan exiles.

“Uganda was a potential trading partner for Rwanda but no significant trade was happening between the countries and any business person who plied this trade route was imprisoned by government accusing him of espionage,” said Paul Ruhamyambuga, a prominent businessman for over three decades.

Rwanda had an administered economy, which imposed severe restrictions on trade and foreign exchange transactions. By the early 1990s, the average tariff rate was 34.8 per cent, with five different tariffs ranging from 0-60 per cent.

However, tariffs were reduced considerably with the average rate decreasing to 18 per cent. There remained four tariff bands with a maximum of up to 30 per cent by 2003, a significant reform when compared with the tariffs prior to 1994.

According to last year’s report, trade between Rwanda and the East African Community bloc is the most vibrant with imports from the region comprising $516 million while exports to the region stood at $123 million, up from scratch two decades ago.