Country Brief

History Country Brief last updated September 2009

Rwanda is a small, landlocked country in Central Africa with 9.7 million people and a high population density (368 people per sq. km). Rwanda became independent in 1962 after colonization by Germany (1899) and Belgium (1919). In 1961, its monarchical government was formally abolished by a referendum and the first parliamentary elections were held.

Political turmoil over the sharing of power and access to opportunities resulted in explosions of ethnic violence which have marked much of the recent history of the country. A civil conflict pitting the Hutu-led government against the Rwanda Patriotic Front (RPF), a Tutsi-led rebel movement, culminated in genocide, between April and June 1994. About 800,000 people were massacred by the army and the extremist Interahamwe militia. The RPF overthrew the regime in June 1994.

While the country is currently at peace, Rwandans continue to struggle with the legacy of genocide. National reconciliation is a long-term endeavor that has the full commitment of the Government and the support of the international community. The Rwandan Government has undertaken significant measures to consolidate reconciliation including the continuation of the demobilization and reintegration project for ex-combatants and a model of democratization focused on a decentralized administration.

Economic and Social Progress

Rwanda has made remarkable progress since the 1994 genocide and civil war. Peace and political stability have been re-established, reconciliation efforts are continuing, and democratic institutions and processes are being strengthened. Poverty and social indicators have also improved. Rwanda has been able to maintain overall macroeconomic stability and implement extensive reforms which have contributed to a strong growth performance.

Rwanda’s US$4.2 billion economy grew 7.9 percent in 2007 and an estimated 8.5 percent in 2008. Average real GDP growth rates showed a considerable slowdown from an annual rate of about 10.5 percent attained over 1996-02.–-the first few years following the conflict—to 5.6 percent over the period 2003-2007, but is now once again picking up, due largely to strong agricultural performance. Increased productivity in the agricultural and service sectors, accompanied by strong public and private sector investment activity are key sources of growth, employment and poverty reduction in the short to medium term.

Strong implementation of macroeconomic policies enabled Rwanda to reach completion point for the Highly Indebted Poor Countries Initiative (HIPC) in March 2005 and to qualify for the Multilateral Debt Relief Initiative (MDRI) in March 2006. Parallel efforts have been made to put in place a sound economic governance framework, including independent regulatory agencies, stronger public expenditure management systems with independent audit agencies, and a strong focus on anti-corruption. Until recently, inflation has been contained at less than ten percent most of the time since 1997, but has drastically increased to an estimated 15 percent in 2008 due to higher food and fuel prices. However, inflation is expected to decline in 2009 as import prices fall.

At present, the global economic slowdown has had a limited effect on Rwanda’s economy due to the country’s low level of integration with the global economy and the relatively high dependence on subsistence agriculture; however, a continued global slowdown may lead to a 2.5 percent decrease in GDP growth over the medium term due to lower tourism receipts, reduction in remittances and a slowdown in the construction sector. In addition, despite the strong increase in export receipts of agricultural products, minerals, and tourism, the trade deficit is expected to widen in 2009 due to the higher growth in import payments. The current account deficit is projected to increase from US$303.5 million (or 7.1 percent of GDP) in 2008 to US $400.7 million (or 8.2 percent of GDP) in 2009.

Rwanda is on track to achieve several of the Millennium Development Goals (MDGs): MDG 2 on universal primary education; MDG 3 on gender equality; and MDG 6 on HIV/AIDS and malaria. Net primary enrollment is currently 95 percent, with 97 percent enrollment of girls. However, low completion rates and poor quality of basic education show that there are still major challenges to meeting MDG 2. HIV prevalence is estimated at about three percent with female infection rates (3.6 percent) substantially higher than those of males (2.3 percent). Rwanda is also on track to achieve the targeted reduction in malaria incidence.

In contrast, MDG 1 on poverty and hunger, and MDGs 4 and 5 on child and maternal mortality respectively are unlikely to be achieved without a considerably scaled-up effort. Between 2000/01 and 2005/06, poverty fell from 60.5 percent to 57 percent. A much faster reduction is needed to reach the MDG target of 30 percent. Malnutrition rates in children under five have been declining from about 24 percent in 2000 to 18 percent today, but faster progress is needed. Infant mortality dropped from 107 per 1,000 in 2000 to 86 in 2005 and maternal mortality decreased from 1,071 per 100,000 to 750 over the same period. Rwanda is now on track to achieve MDG 4 with a drop in under-five mortality to 103 per 1,000. The percentage of assisted deliveries increased from 39 to 52 in 2005-08.

Development Challenges

There are four particular challenges for economic growth in this small, agriculture-based economy: poor water management, low use of modern inputs and lack of extension services in agriculture; the poor condition of infrastructure; and the low base of technical and managerial skilled labor.
Agriculture currently accounts for just fewer than 40 percent of GDP and provides jobs to 80 percent of the population. Most Rwandans rely on subsistence agriculture; with limited participation in the market economy. Production remains low, and constraints to agricultural growth are severe. The contribution of the private sector to the economy and poverty alleviation remains limited; there are only about 400 enterprises in Rwanda, of which half have less than 50 employees. Private sector development remains hampered mainly by a lack of infrastructure (especially roads and energy) services and, to a lesser extent; the weakness of the financial sector. Rwanda’s key challenge going forward is to leverage its recent progress for a much higher development path that will put the country’s long term economic and social aspirations within reach.

Regional integration, especially in the infrastructure sectors, is a pre-requisite to economic growth in a landlocked country like Rwanda. Rwanda joined the East African Community (EAC) on July 1, 2007. Rwanda is also a member of the Nile Basin Initiative, the Economic Community for the Great Lake Countries (CEPGL) and the Common Market for Eastern and Southern Africa (COMESA). Regional Integration is therefore a key priority for the Government as well as the World Bank (see below).

Rwanda’s long term development vision is articulated in the Rwanda Vision 2020 document. The vision sees Rwanda as a lower middle income economy (US$900 per capita) operating as a knowledge-based service hub by 2020.The Vision 2020 objectives are fully in line with the MDGs, but its targets are more ambitious.

In September 2007, the Government completed and adopted its Economic Development and Poverty Reduction Strategy (EDPRS). The EDPRS articulates the country’s priorities for 2008-2012 assigning the highest priority to accelerating growth to create employment and reduce poverty. Its key targets are: (i) growth of about eight percent per year; (ii) reduction in poverty to about 46 percent. The strategy is framed around three strategic flagship programs:

• Flagship one (Growth) targets economy wide improvements in productivity. Its goal is to transform Rwanda’s economy from subsistence agriculture towards increased commercial agriculture, as well as manufacturing and services. The highest importance is given to improving infrastructure.
• Flagship two (Vision 2020 Umurenge) focuses on ensuring growth is shared by creating economic opportunities for the poorest Rwandans. It has three components: (i) public works; (ii) credit packages; and (iii) direct supports.
• Flagship three (Governance) seeks to strengthen political and economic governance, and build institutions and capacity of the state. It envisages a wide range of reforms to strengthen public sector institutions and capacity and also includes aspects needed to create an attractive business environment including strengthening commercial justice systems, regulatory and administrative frameworks, and promoting principles of good corporate governance.

In order to achieve the Government’s long term development goals, the EDPRS has a strong focus on growth through improved economic infrastructure and greater productivity of agriculture. The EDPRS also pays particular attention to program implementation.

World Bank Engagement

The Bank’s new Country Assistance Strategy (CAS), which was discussed by the Board of Executive Directors on September 25, 2008, has been jointly prepared by the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in an effort to draw greater synergy from the World Bank Group and catalyze higher volumes of private resources to support Rwanda’s development. It is closely aligned with the EDPRS and seeks stronger impact through greater selectivity in line with Government of Rwanda’s preferences for engagement with the Bank and enhanced harmonization with other donors. The CAS is framed around two strategic themes:

• Promote economic transformation and growth. The primary objective of the CAS is to help Rwanda make progress in activating new drivers of growth that can be sustained over time. The substantial part of the financial envelope over the period will therefore support the EDPRS flagship on growth and focus on four key outcomes: (i) raising agricultural production in a sustainable way; (ii) improving access to and quality of key economic infrastructure services; (iii) improving the environment for private sector development; and (iv) strengthening management of public resources at central and local levels.
• Reduce social vulnerability. A secondary objective is to ensure that the most vulnerable Rwandans also benefit from growth and to help Rwanda make further progress in building a more stable society. A smaller program will involve support to the Flagship Vision 2020 Umurenge initiative; help Rwanda get on track on child and maternal mortality goals; and promote peace and social cohesion through demobilization and reintegration.

These themes are being supported through ten active national and four regional projects—also referred to as investment lending —as outlined below. In addition, the World Bank supports the implementation of the EDPRS through a series of Poverty Reduction Strategy Grants (PRSGs). PRSG’s are programmatic fast disbursing grants—also referred to as Development Policy Lending—in direct support of the Government’s medium term policies.
In addition to financing, the World Bank provides various analytical and advisory activities (AAA) to complement financial support. (See publications and reports.)

As of end Sept 2009, the World Bank projects portfolio comprised:

National Projects

• A US$33.4 million Human Resources Development Project (approved in June 2000) to build up Rwanda's human resources and institutional capacity to deliver education services. Specific actions are geared to: (i) improve access to basic education; (ii) improve the quality of inputs (teaching, instructional materials, methods of supervision) in primary and secondary education; (iii) heighten awareness and train students, parents and educators to combat the AIDS epidemic; (iv) build institutional capacity and improve efficiency in the management of the education system.
• A US$46.68 million Competitiveness and Enterprise Development Project (approved in April 2001) to establish an enabling environment for growth and development of the private sector that would help reduce poverty in Rwanda. The project is designed to promote a competitive climate by: (i) streamlining the business environment; (ii) reducing costs and increasing the efficiency of telecommunications, water & electricity utilities, and the tea industry; and (iii) improving access to financial and support services to local entrepreneurs.
• A US$35 million Second Rural Sector Support Project (approved in June 2008,) to increase agricultural production and marketing in marshland and hillside areas targeted for development under the Project in an environmentally sustainable manner. This will be achieved by assisting rural households to expand and intensify sustainable crop production systems and to increase their participation in agricultural markets.
• A US$25 million Urgent Electricity Rehabilitation Project (approved in January 2005) to alleviate power shortages; and enhance the capabilities of energy sector institutions in Rwanda.
• A US$20 million Decentralization and Community Development Project (approved in June 2004) to boost the emergence of a dynamic local economy, through communities who are empowered to lead their own development process under an effective local government.
• A US$20 million Public Sector Capacity Building Project (approved in July 2004) seeks to reduce the acute skill gap resulting from war and genocide by strengthening capacities at the central and local government levels, and in the private sector and Civil Society Organizations (CSOs).
• A US$10 million e-Rwanda Project (approved in September 2006) to improve (i) efficiency and effectiveness of some internal processes of the Government of Rwanda, and (ii) the delivery of services in selected key sectors including better access to information through the use of technology.
• A US$11 million Transport Sector Development Project (approved in August 2007) to improve the quality of Rwanda's paved road network and to generate sustained employment in rural areas through road maintenance works. This project also receives US$38 million form the Africa Catalytic Growth Fund.
• A US$4.3 million Integrated Management of Critical Ecosystem Project (Global Environment Trust Fund managed by the Bank and  approved by the board  on June 30, 2005) to help farmers to adopt sustainable agricultural intensification technologies that increase agricultural productivity and improve livelihood while protecting the natural resource base.
• US $25 million Rwanda Education for All – First track  Initiative Development Policy Grant:  The objective for the grant is to support the GoR’s policy reforms on Teacher Development and Management, Textbooks, and Girls’ Education with the overall aim to improve the quality of basic education.
• US $8 million Rwanda Second Emergency and Reintegration Project ( Aproved on August 27,2009) to support the Government’s efforts to demobilize members of armed groups of Rwandan origin and members of the Rwandan Defense Force; provide socioeconomic reintegration support to the said members following their demobilization, with a particular focus on the provision of such support to female, child, and disabled ex-combatants.
• A US$6 million First Community Living Standard (Approved in April 2009) to support Government of Rwanda (GoR's) social protection and health policy reforms designed to reduce extreme poverty, initially in 30 pilot sectors, and to expand access to high-impact health, nutrition and population interventions at the community level.