RWANDA

Key conditions andchallenges

Table 1

2023

Population, million

14.1GDP, current US$ billion

13.7

GDP per capita, current US$974.4

International poverty rate ($2.15)

a52.0
a78.0

a92.2

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a43.7

School enrollment, primary (% gross)b134.9b66.1

Total GHG emissions (mtCO2e)

8.4Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2016), 2017 PPPs.
b/ WDI for School enrollment (2022); Life expectancy(2021).

Rwanda’s strong economic momentum
continued in 2023, with 8.2 percent
growth in 2023—led by services, manufacturing, and construction. Inflationarypressures have eased due to improvements
in domestic food production, lower commodity prices, and the tight monetary
policy stance by the central bank. RealGDP growth is projected at 7.6 percent
on average in 2024–2025.

In the decade up to 2019, Rwanda’s GDP
per capita increased steadily at a rate of
4.5 percent per year, surpassed only by
Ethiopia among SSA economies. Rwanda
has also achieved substantial gains inpoverty reduction, educational attainment,
health services delivery, and access to basic services. However, the economy faces
severe constraints. The heavy emphasis on
public investment has neither generated
sufficient jobs nor resulted in rapid gains
in productivity. The Human Capital Index
places Rwanda at 160th out of 174 countries. High public debt levels, vulnerability
to climate change, and the accelerating
degradation of natural assets will hinder
the achievement of Rwanda’s targets of becoming an upper middle-income country
by 2035 and a high-income country by2050. The highest food inflation in 15 years(63 percent in March 2023) triggered by insufficient rainfall, highlighted the importance of increasing the persistently low
productivity in agriculture to increase incomes of rural households and to improve
food security and availability. Overcoming
these challenges will require greater reliance on private sector investment to enhance productivity growth, raise incomes,
and provide the necessary financing needed to address infrastructure shortfalls.
Critical areas, which would need toprogress faster and drive rapid private sector investment growth in Rwanda, include

enhancing competition, building firms’ capabilities, increasing access to finance, fostering development and diffusion of information and communication technologies,and innovation.

Recent developments
Rwanda’s economy achieved significant
growth in 2023, estimated at 8.2 percent,despite lower global prices for its main exports and flooding that disrupted cropproduction. This performance was supported by stronger services sector and robust domestic demand, fueled by sizable
investment projects. The information andcommunications industry made the largest
contribution to GDP growth, benefitingfrom increased internet and mobile subscriptions, followed by manufacturing,transport services, and construction.
The National Bank of Rwanda’s tightermonetary stance, along with improvements in domestic food production andlower commodity prices, have contained
inflationary pressures. NBR hiked the policy rate by an additional 50 basis points inAugust 2023 to 7.5 percent (Figure 1). Inflation fell gradually to 4.9 percent in February 2024 from the peak of 22.7 percent
in November 2022. After experiencing 18
months of the highest monthly food inflation in the last 15 years starting in May
2022, much lower food inflation at 6.3 percent in February 2024 eased the pressure
on household budgets, especially for poor
households. To counteract the effect of a
sharp depreciation of the franc against theFIGURE 1 Rwanda / Headline and core inflation and central
bank rate

FIGURE 2 Rwanda / Actual and projected poverty rates andreal private consumption per capita

Percent
25

Poverty rate (%)

Real private consumption per capita (constant LCU)

100

7000009020600000

80

1570500000

60

40000050104030000030200000

205100000

1000
Jan-22

May-22Inflation (CPI)

Sep-22

Jan-23May-23

Core inflation

Sep-2302010 2012 2014 2016 2018 2020 2022 2024 2026

Jan-24

Central bank rate

Source: World Bank staff estimates.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real priv. cons. pc

Source: World Bank. Notes: see Table 2.

MPO

1

Apr 24

U.S. dollar—about 18. percent in 2023—on
inflation, the NBR has doubled its dollar
sales to commercial banks to US$10 million
per week from US$5 million.
The FY24 budget envisages a temporary fiscal expansion to cushion the effects of recentfloods. Total reconstruction spending is estimated at around 3 percent of GDP over thenext five years, of which two-thirds will be
disbursed in FY24–FY25. The resulting creation of jobs in construction is expected tobenefit lower-income households. Despite
this, the government remains committed tofiscal prudence through improved domestic
revenue mobilization, spending rationalization, and increased transparency and efficiency. Relying largely on concessionalloans to finance the deficit, Rwandan’s public debt is sustainable despite increases inthe stock, which is estimated at 71.6 percent
of GDP in 2023.

Outlook
Rwanda’s GDP is projected to grow at
7.6 percent on average in 2024–26. After
weak performance in the last two years,

agriculture is expected to rebound due tofavorable weather. Growth will also be
supported by continued growth in global
tourism demand, construction, and manufacturing activities supported by the Manufacture and Build to Recover Program.
Driven by growth in private consumptionof 4.5 percent a year in 2024-2026, poverty
is projected to decline from 48.4 percent in
2024 to 47 percent in 2026. The current account deficit is projected to remain wider
in 2024 due to increased imports required
for the post-flood reconstruction and thelarge airport construction project. Sustained strong FDI inflows and concessional
financing will cover external financing
needs. Inflation is expected to gradually
return within NBR’s target of 5±3 percent.
The government is committed to prudent
fiscal management. In the FY24–FY26 budget framework, the government projects
spending cuts largely through streamlining and gradually reducing subsidies particularly those related to energy and fuel.
It is critical to reduce energy subsidies ina way that keeps electricity affordable forlow-income households. The authorities
are also planning to strengthen the oversight, governance, and risk management ofTABLE 2 Rwanda / Macro poverty outlook indicatorsstate-owned enterprises while safeguarding fiscal space for human capital spending. The government also intends to improve revenue administration and cut tax
rates while broadening the tax basethrough measures in the Medium-Term
Revenue Strategy. Under this baseline,
public debt would peak at 78 percent ofGDP in 2024 before gradually improving
over the medium term.
The outlook is subject to substantial downside risks. Even though Rwanda has limited direct trade and financial links to theMiddle East, an intensification of the conflict in the region could lead to further disruptions to the global trade and economy,
thus affecting Rwanda mainly through areduced global demand for its main export
products. Limited access to concessional
resources and lower external demand fueled by monetary tightening in advancedeconomies pose further downside risks.
The main risk on the domestic front
is linked to the increasing frequency ofweather and climate shocks, which could
disrupt agricultural output again negatively affecting incomes and food security for rural households, and reigniting
inflationary pressures on food.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
10.9
6.0
13.7
9.6
2.4
2.7

2022
8.2
12.1
10.6
-12.6
29.4
17.9

2023e
8.2
8.0
3.1
4.5
25.8
14.4

2024f
7.6
4.5
14.6
15.0
13.1
12.6

2025f
7.8
6.8
10.1
10.7
11.2
10.9

2026f
7.5
6.8
8.1
7.2
11.2
8.9

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

10.6
6.4
13.3
11.9

7.8
1.6
5.0
12.2

8.6
1.7
10.2
11.2

7.6
6.6
9.5
7.3

7.8
5.5
9.3
8.3

7.5
5.4
9.0
7.9

Inflation (consumer price index)

1.1

12.1

15.4

6.8

5.0

5.0

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-11.1
2.1

-9.7
2.4

-11.9
3.3

-11.3
3.9

-10.1
4.4

-10.2
4.5

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-9.8
24.8
74.4
-8.0

-9.2
23.5
69.9
-7.3

-8.5
22.9
73.0
-6.3

-6.8
23.1
78.0
-4.9

-5.6
23.3
77.6
-4.0

-5.9
23.2
75.2
-4.6

51.1
77.5
92.0

49.6
76.5
91.7

48.7
76.0
91.6

48.4
75.8
91.5

47.7
75.3
91.4

47.0
74.9
91.2

6.4
31.1

2.5
30.7

1.4
29.8

2.4
30.0

2.9
30.2

3.2
30.3

a,b

International poverty rate ($2.15 in 2017 PPP)
a,bLower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2010-EICV-III and 2016-EICV-V. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026.
b/ Projection using average elasticity (2010-2016) with pass-through = 0.25 based on private consumption per capita in constant LCU.

MPO2

Apr 24