Rwanda
-- Economy
With
one of the
lowest urbanization
rates in
Africa--
only about
8% of the
population
lives in
towns [1]--
the majority
of Rwandans
are subsistence
farmers.
There are
a few coffee
and tea
plantations
and processing
plants in
the northern
part of
the country,
but these
industries
suffered
looting
and destruction
in 1994.
With economic
aid from
the international
community,
tea and
coffee are
being rehabilitated
and have
reached
pre-1994
production
levels.
Coffee is
Rwanda's
main export,
accounting
for 60%
of the countries
foreign
exchange
earnings.
Tea accounts
for about
30%. Rwanda
has a small
industrial
sector that
only employs
about 3%
of the population.
Other than
agricultural
processing,
there is
also a brewery.
The industrial
sector was
hard hit
by the recent
turmoil
and has
just begun
to recover.
The
Rwandan
economy
was completely
devastated
by war in
1990-1994.
The present
government
is trying
to help
the economy
recover
by adopting
a neo-liberal
approach
[1]. This
includes
trying to
increase
the revenue
from exports
of coffee
and tea
by privatizing
large sectors
of this
government
run industry.
There is
also an
attempt
to diversify
the type
of foreign
exchange
earning
exports.
One of the
major problems
that the
Rwandan
economy
is facing
is that
energy imports
use more
foreign
exchange
reserves
than exports.
Another
approach
is to cut
government
spending
by reducing
the number
of civil
service
employees
and selling
government
run parastatals.
Another
serious
obstacle
that the
recovery
of the economy
faces is
that in
Rwanda,
as a landlocked
country,
transportation
costs are
high. With
assistance
from donor
countries,
and in cooperation
with the
East African
community,
Rwanda is
planning
to improve
its transportation
infrastructure.
Rwanda is
a poor country
with an
economy
based largely
on subsistence
agriculture.
The scarcity
of arable
land and
a rapid
rate of
population
growth has
severely
strained
the country's
efforts
to develop
its economy.
Since 1959
Rwanda's
political
and social
instability
has had
serious
economic
repercussions.
Intense
demographic
pressure,
the shortage
of arable
land, and
lack of
access to
the Indian
Ocean have
been three
critical
problems
in Rwanda's
economic
development.
New challenges
arose in
1994 when
several
social problems
brought
on catastrophic
changes
to the country's
economy.
These included
the murder
of hundreds
of thousands
of Rwanda's
citizens
in ethnic
violence,
the flight
of over
a million,
and the
return of
large numbers
of refugees
who had
fled the
country.
Today,
Rwanda is
slightly
more urbanized
than in
1993. Kigali's
population
has increased
by nearly
100,000
and has
now reached
300,000.
Seventy
percent
of this
new urban
population
consists
of arrivals
from rural
areas. Nonetheless,
Rwanda remains
one of the
least urbanized
countries
in Africa.
Only 8%
of the population
lives in
towns, an
increase
of only
5% since
1965. Most
Rwandans
continue
to work
as subsistence
farmers.
Virtually
all potential
farmland
has been
brought
under cultivation,
though some
land has
recently
gone fallow
because
farmers
have fled
or been
killed.
The
Belgian
colonial
government
converted
Rwanda to
a cash-based
economy
by setting
up enforced
tea and
coffee production.
These two
crops have
remained
the country's
main exports
ever since.
A policy
to diversify
the country's
export base
was implemented
recently
under an
IMF-sponsored
Structural
Adjustment
Program
(SAP) launched
in 1990,
but this
program
was abandoned
in 1994.
Rwanda`s
government
is the nation's
main employer.
Since independence,
the ruling
party has
allocated
government
positions
primarily
according
to a patronage
system that
rewards
party loyalty
and regional
origin.
After the
political
crisis of
1994 and
the flight
of much
of the civil
service,
the new
government
promised
to end the
patronage
system and
to introduce
strict criteria
for competent
performance
in state
employment.
It has also
pledged
to privatize
most parastatals.
Rwanda's
two most
profitable
parastatals,
Electrogas
and Rwandatel,
which control
the energy
and telecommunications
sectors
respectively,
are soon
to be privatized.
A
government
policy encouraging
over-cultivation
of arable
land with
the aim
of keeping
out refugees
was an important
factor leading
to the 1990
invasion.
It has subsequently
been changed
to allow
returnees
to re-acquire
their land,
but implementation
of the new
policy has
been beset
by complications.
Other measures
orienting
the economy
towards
the free
market have
been undertaken
by the government.
Tariff bands
have been
reduced.
The Rwandan
franc now
floats freely.
There are
numerous
independent
foreign
exchange
bureaus
in Kigali.
Depositors
may maintain
foreign
exchange
accounts;
expatriates
may repatriate
their money,
unless it
comes from
sales of
tea and
coffee.
In this
case, they
must change
90% of their
moneys at
a Rwandan
bank. The
World Bank
works closely
with the
Finance
Ministry
in formulating
economic
policy;
together
they recently
announced
a new growth
plan for
low inflation,
privatization
and aid
directed
at infra-structural
recovery
rather than
emergency
relief.
Agricultural
policy is
aimed at
improving
the production
of subsistence
and commercial
crops. Rwanda
is still
heavily
dependent
on international
aid for
food, though
land cultivation
increased
by 34% and
the amount
of food
harvested
by 6% between
1996 and
1997. The
total cereal
and pulse
deficit
for 1997
reached
192,000
tons. The
government
lacks resources
to increase
production
significantly,
and so strives
to create
a stable
political
climate,
to ensure
that farmers
suffer no
major disruptions,
and to enable
aid agencies
to carry
on their
work. The
government
has also
sought help
from international
donors to
increase
commercial
agricultural
production.
Rwanda's
major exports
are coffee,
tea, tin
cassiterite,
Wolfframite,
and pyrethrum.
Coffee makes
up between
50% to 80%
of the total
export.
Because
of declines
in export
earnings
and increased
need for
imports,
Rwanda's
policy has
been directed
at ensuring
that net
private
and official
transfers
are sufficient
to keep
the current
account
deficit
at acceptable
levels.
The government
also has
taken steps
to ensure
that tea,
coffee and
industrial
production
at least
maintains
pre-war
levels.
The government
has loosened
restrictions
on foreign
exchange
in an attempt
to stimulate
nontraditional
exports.
It has established
reasonably
tight control
of its border
with Uganda
in an effort
to reduce
smuggling.
Rwanda was
unable to
import or
export goods
easily through
Uganda until
the RPF
came to
power in
1994. This
route now
functions
well. An
alternative
route through
Tanzania
to Dar es
Salaam is
more arduous
and costly,
although
Tanzania
has facilitated
the operation
of this
route in
efforts
to compete
with Mombassa
in Kenya.
Political
insecurity
has disrupted
much of
the trade
between
Rwanda and
the Congo.
Trade with
Uganda is
booming,
in part
because
of family
and business
networks
operated
by returned
refugees.
The same
was true
of Burundi
until neighboring
countries
imposed
sanctions
in 1996.
Rwanda
is a member
of three
regional
trade organizations:
the Common
Market for
Eastern
and Southern
Africa (COMESA),
the Communauté
Economique
des États
de l'Afrique
(CEEAC),
and the
Communauté
Economique
des Pays
des Grands
Lacs (CEPGL).
The country
has also
made a bid
to join
the East
African
Cooperation
(EAC).
Rwanda's
economy
is almost
exclusively
agriculturally
based. More
than 90%
of the population
makes its
livelihood
by producing
food crops
or through
industrial
work involving
the processing
of crops.
Agriculture
contributes
more than
40% of the
nation's
GDP. The
most fertile
agricultural
areas in
the country
are the
mountain
regions
forming
the Congo-Nile
watershed
and the
central
plateau,
where two
crops can
normally
be harvested
each year.
Principal
food crops
include
bananas,
sweet potatoes,
cassava,
sorghum
and beans.
Principal
export crops
include
coffee,
tea, pyrethrum,
cotton and
cinchona.
Cattle
have played
an important
political
and social
role in
the country
under the
Tutsi, whose
dominance
was traditionally
based on
the ubuhake
(a feudal
patron-client
relationship
based on
possession
of cattle).
Most farmers
have some
livestock,
though animal
husbandry
is generally
considered
a supplemental
source of
income.
Fishing
in Rwanda
is underexploited.
Lake Kivu
is well-stocked
and could
support
an annual
catch of
5,000 tons.
The potential
of Lake
Ihema has
also underutilized.
Manufacturing
is a relatively
minor source
of Rwanda's
revenue,
employing
about three
percent
of the labor
force and
contributing
only about
17% of the
nation's
GDP. The
small manufacturing
sector is
based on
processing
agricultural
products
and low-technology
consumer
items such
as beer,
matches,
sugar, and
soap. Industry
suffered
severe setbacks
in 1994,
when many
skilled
workers
were put
to death
or were
forced to
flee. Half
of the country's
120 working
factories
were damaged
or looted.
GDP:
purchasing
power parity$3
billion
(1996 est.)
GDPreal
growth rate:
13.3% (1996)
GDPper
capita:
purchasing
power parity$440
(1996 est.)
GDPcomposition
by sector:
agriculture:
37%
industry:
17%
services:
46% (1995
est.)
Exports:
total value:
$62.3 million
(f.o.b.,
1996 est.)
commodities:
coffee
74%,
tea, cassiterite,
wolframite,
pyrethrum
(1995)
partners:
Brazil,
EU
Imports:
total value:
$202.4 million
(f.o.b.,
1996 est.)
commodities:
foodstuffs
35%, machines
and equipment,
capital
goods, steel,
petroleum
products,
cement and
construction
material
(1995) partners:
US, EU,
Kenya, Tanzania
Source:
CIA World
Fact Book
[1]
The Economist
Intelligence
Unit. 1998-99.
Country
Profile.
Rwanda and
Burundi.
The Unit:
London,
pp. 16-18.