Economics @ BSAK: Unit 4: Development

The Rwandan economy comes under special focus in 2014 because it is twenty years since the genocide. This blog provides some summary growth and development data and links on Rwanda, a country that is attracting increasing interest from students and teachers as part of their development economics course.

Rwanda is a small landlocked country with a population of just around 12 million.

In recent years it has been one of the fastest growing countries in the world. Real GDP growth is forecast at 7.5% in 2014 and the government has an ambitious target of sustaining growth rates closer to 10% in the next five years as part of a broader aim of lifting Rwanda into middle income territory.

There has bee rapid growth in agriculture, construction and services (communication and transport). Improved power supply (through major infrastructure projects) and rapid development of the private sector are contributing factors.

GDP per capita (US $700, rising to $1402 at PPP) and human development indicators remain low but the nation has reduced the percentage of people living below the poverty line from 59 percent to 45 percent between 2001 and 2011.

Agriculture made up three quarters of its employment in 2000; that fell to 52 per cent in 2011. A mining and construction boom emerged.

Trade

Rwanda's current account (BoP) deficit remains large (11% of GDP expected in 2014) largely because of high imports of capital and consumer goods and a low and narrow export base.

Tin ore and coltan exports are catching up with traditional exports (coffee and tea) but the country has no oil, natural gas.

Debt

Rwanda is a country has has a low level of national debt - around 25% of GDP in 2014 but the level of public debt reflects both debt cancellation in 2005 under the HIPC initiative and continued substantial grants (35% of government revenue, 9% of GDP in 2013), Rwanda is heavily reliant on donors’ assistance - it is seeking to reduce aid dependency.

Market-driven development

Rwanda is held up as an example of a sub-Saharan African country that has tried to introduce market-friendly economic reforms as part of their development strategy. The market-oriented reforms has resulted in Rwanda being ranked highest for top business environment in Africa and has contributed to large foreign capital inflows. FDI is growing fast, forecast at 3% of GDP in 2014 – mostly from Kenya and Uganda.

Technology is a driver of growth. The nation has wired itself with well over 1,000 miles of fiber optic cables, and last year the government signed a deal to build a 4G network that would cover 95 percent of the country.

Trade creation with the East African Community

As a small country, membership in the East African Community provides access to a larger regional market. The East African Community (EAC) is a regional intergovernmental organisation between Burundi, Kenya, Rwanda, Tanzania and Uganda having as objectives the implementation of a customs union, of a common market and of a monetary union.