Rwandan Economy Projected to Remain on a Strong Growth Path

When one thinks of Rwanda, a war torn country full of impoverished people with no notable economy of any kind probably first leaps to mind. However, in reality, Rwanda has become one of the fastest growing economies in East Africa. In 2014, it posted a growth in Gross Domestic Product (GDP) of 7 percent. This year’s predictions put growth at 6.5 percent for 2015 and 2016.

When one thinks of Rwanda, a war torn country full of impoverished people with no notable economy of any kind probably first leaps to mind. However, in reality, Rwanda has become one of the fastest growing economies in East Africa. In 2014, it posted a growth in Gross Domestic Product (GDP) of 7 percent. This year’s predictions put growth at 6.5 percent for 2015 and 2016.

Last year’s growth rate spiked sharply after the economy rebounded from cuts in foreign aid and investment. In 2012, Rwanda and her President, Paul Kagame, suffered allegations of supporting rebels in Congo, leading to a dip in foreign aid and a growth rate of only 4.6 percent. That number has risen once again as memory of the allegation fades, but levels are still not as high as before 2012.

While this aid has been a key part of Rwanda’s economy for several years, Rwanda wishes to move away from being a panhandler nation compared to the rest of the world. Claver Gatete, Rwanda’s Minister of Finance and Economic Planning announced the 2015/2016 budget, noting the diminishing importance of foreign donor money on the Rwandan economy. According to a report by Reuters, Gatete said weakness in the global economy would likely hurt aid-dependent Rwanda, calling the aid “unpredictable” and “small,” and adding, “It’s shrinking every day.” Donor aid made up 20 percent of Rwanda’s budget.

Much of that growth comes from Rwanda’s agricultural sector, which grew by 5%, as well. Even the International Monetary Fund (IMF), which recently analyzed Rwanda’s economy, has been impressed by its rate of growth. The IMF predicted even more optimistic numbers than Rwanda’s Finance Minister, putting the figure for total GDP growth around 6.7 percent for this year.

Nevertheless, investors have not flocked to this developing nation as they have to others. The country still struggles with deep divides caused by its history of civil war and genocide. Not at a point where it can begin industrializing in earnest, Rwanda’s long-term prospects remain uncertain. Of course, this lower reliance on fuels means the drop in oil prices has not overly affected the nation.

In the short term, the nation’s booming growth has drawn in its fair share of foreign investors eager to get in early on a country that just a few years ago had literally nowhere to go but up. Rwanda will be an interesting nation to watch, both in terms of its financial growth, and to see what its newfound success might bring to the nation socially.