Economy of Rwanda
Encyclopedia
Rwanda is a rural country with about 70% of the population engaged in agriculture. It is the most densely populated country in Africa; is landlocked; and has few natural resources and minimal industry. Primary exports are coffee and tea. The 1994 genocide
Rwandan Genocide
The Rwandan Genocide was the 1994 mass murder of an estimated 800,000 people in the small East African nation of Rwanda. Over the course of approximately 100 days through mid-July, over 500,000 people were killed, according to a Human Rights Watch estimate...

 destroyed Rwanda's fragile economic base, severely impoverished the population, particularly women, and eroded the country's ability to attract private and external investment. However, Rwanda has made significant progress in stabilizing and rehabilitating its economy. In June 1998, Rwanda signed an Enhanced Structural Adjustment Facility
Enhanced structural adjustment facility
The Enhanced Structural Adjustment Facility was a program of financial assistance given to poor countries from December 1987 through 1999 through the International Monetary Fund...

 with the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

. Rwanda has also embarked upon an ambitious privatization program with the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

. Continued growth depends on the maintenance of international aid levels and the strengthening of world prices of coffee and tea.

The Rwandan economy is based on the largely rainfed agricultural production of small, semisubsistence, and increasingly fragmented farms. It has few natural resources to exploit and a small, uncompetitive industrial sector. While the production of coffee and tea is well-suited to the small farms, steep slopes, and cool climates of Rwanda and has ensured access to foreign exchange over the years, farm size continues to decrease.

Prewar population was growing at the high rate of 3% a year. By 1994, farm size, on average, was smaller than one hectare, while population density was more than 450 persons per square kilometer of arable land
Arable land
In geography and agriculture, arable land is land that can be used for growing crops. It includes all land under temporary crops , temporary meadows for mowing or pasture, land under market and kitchen gardens and land temporarily fallow...

.

History

In the 1960s and 1970s, Rwanda's prudent financial policies, coupled with generous external aid and relatively favorable terms of trade, resulted in sustained growth in per capita income and low inflation rates. However, when world coffee prices fell sharply in the 1980s, growth became erratic.

Compared to an annual GDP growth rate of 6.5% from 1973 to 1980, growth slowed to an average of 2.9% a year from 1980 through 1985 and was stagnant from 1986 to 1990. The crisis peaked in 1990 when the first measures of an IMF structural adjustment program were carried out. While the program was not fully implemented before the war, key measures such as two large devaluations and the removal of official prices were enacted. The consequences on salaries and purchasing power were rapid and dramatic. This crisis particularly affected the educated elite, most of whom were employed in civil service or state-owned enterprises.

During the 5 years of civil war
Rwandan Civil War
The Rwandan Civil War was a conflict within the Central African nation of Rwanda between the government of President Juvénal Habyarimana and the rebel Rwandan Patriotic Front...

 that culminated in the 1994 genocide, GDP declined in 3 out of 5 years, posting a dramatic decline at more than 40% in 1994, the year of the genocide. The 9% increase in real GDP for 1995, the first postwar year, signaled the resurgence of economic activity.

After the Rwandan Genocide, the Tutsi-led government began a major program to improve the country's economy and reduce its dependence on subsistence farming. The failing economy had been a major factor behind the genocide, as was overpopulation and the resulting competition for scarce farmland and other resources. The government focused primarily on building up its manufacturing and service industries and eliminating barriers to trade and development.

The Government of Rwanda posted a 13% GDP growth rate in 1996 through improved collection of tax revenues, accelerated privatization of state enterprises to stop their drain on government resources, and continued improvement in export crop and food production. Tea plantations and factories continue to be rehabilitated, and coffee, always a smallholder's crop, is being more seriously rehabilitated and tended as the farmers' sense of security returns. However, the road to recovery will be slow. Coffee production of 14,578,560 tons in 2000 compares to a pre-civil war variation between 35,000 and 40,000 tons. By 2002 tea became Rwanda’s largest export, with export earnings from tea reaching US$ 18 million equating to 15 000 tons of dried tea. Rwanda's natural resources are limited. A small mineral industry provides about 5% of foreign exchange earnings. Concentrates of the heavy minerals cassiterite
Cassiterite
Cassiterite is a tin oxide mineral, SnO2. It is generally opaque, but it is translucent in thin crystals. Its luster and multiple crystal faces produce a desirable gem...

 (a primary source of tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...

), and coltan
Coltan
Coltan is the industrial name for columbite–tantalite, a dull black metallic mineral from which the elements niobium and tantalum are extracted. The niobium-dominant mineral is columbite, hence the "col" half of the term...

(used to manufacture electronic capacitors, used in consumer electronics products such as cell phone
Mobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...

s, DVD player
DVD player
A DVD player is a device that plays discs produced under both the DVD-Video and DVD-Audio technical standards, two different and incompatible standards. These devices were invented in 1997 and continue to thrive...

s, video game systems and computers
Personal computer
A personal computer is any general-purpose computer whose size, capabilities, and original sales price make it useful for individuals, and which is intended to be operated directly by an end-user with no intervening computer operator...

).
Cassiterite production peaked at 1,000 tonnes in 1990, but was under 700 tonnes in 2000. Recorded coltan production has soared from 147 tonnes in 1999 to 1,300 tonnes in 2001, and coltan was the country's biggest single export earner in 2001. It has been under-acknowledged to date that at least part of the increase in production is because of new mines opening up in Rwanda. However, it is also true, as has frequently been observed, that the increase is because of the fraudulent re-export of Congolese coltan. In addition to the well-publicised involvement in this trade of the Rwandan Defence Force (RDF), another important factor in the coltan re-export is that international dealers are under pressure not to buy from the DRC, thus increasing the incentive for DRC coltan to be re-exported as Rwanda's. Rwanda is also alleged to be trading in fraudulently exported gold and diamonds from the DRC
Deposits of wolframite
Wolframite
Wolframite WO4, is an iron manganese tungstate mineral that is the intermediate between ferberite and huebernite . Along with scheelite, the wolframite series are the most important tungsten ore minerals. Wolframite is found in quartz veins and pegmatites associated with granitic intrusives...

 (a major source of tungsten
Tungsten
Tungsten , also known as wolfram , is a chemical element with the chemical symbol W and atomic number 74.A hard, rare metal under standard conditions when uncombined, tungsten is found naturally on Earth only in chemical compounds. It was identified as a new element in 1781, and first isolated as...

 is also mined, along with small amounts of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...

 and sapphire
Sapphire
Sapphire is a gemstone variety of the mineral corundum, an aluminium oxide , when it is a color other than red or dark pink; in which case the gem would instead be called a ruby, considered to be a different gemstone. Trace amounts of other elements such as iron, titanium, or chromium can give...

s. Production of methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...

 from Lake Kivu
Lake Kivu
Lake Kivu is one of the African Great Lakes. It lies on the border between the Democratic Republic of the Congo and Rwanda, and is in the Albertine Rift, a part of the Great Rift Valley. Lake Kivu empties into the Ruzizi River, which flows southwards into Lake Tanganyika...

 began in 1983, but to date has been used only by the Bralirwa Brewery
Brewery
A brewery is a dedicated building for the making of beer, though beer can be made at home, and has been for much of beer's history. A company which makes beer is called either a brewery or a brewing company....

.

Depletion of the forests will eventually pressure Rwandans to turn to fuel sources other than charcoal
Charcoal
Charcoal is the dark grey residue consisting of carbon, and any remaining ash, obtained by removing water and other volatile constituents from animal and vegetation substances. Charcoal is usually produced by slow pyrolysis, the heating of wood or other substances in the absence of oxygen...

 for cooking and heating. Given the abundance of mountain streams and lakes, the potential for hydroelectric power is substantial. Rwanda is exploiting these natural resources through joint hydroelectric projects with Burundi and the Democratic Republic of the Congo.

Rwanda's manufacturing sector contributes about 20% of GDP and is dominated by the production of import substitutes for internal consumption. The larger enterprises produce beer, soft drinks, cigarettes, hoes, wheelbarrows, soap, cement, mattresses, plastic pipe, roofing materials, textiles, and bottled water. By mid-1997, up to 75% of the factories functioning before the war had returned to production, at an average of 75% of their capacity. Investments in the industrial sector continue to mostly be limited to the repair of existing industrial plants. Retail trade, devastated by the war, has revived quickly, with many new small businesses established by Rwandan returnees from Uganda
Uganda
Uganda , officially the Republic of Uganda, is a landlocked country in East Africa. Uganda is also known as the "Pearl of Africa". It is bordered on the east by Kenya, on the north by South Sudan, on the west by the Democratic Republic of the Congo, on the southwest by Rwanda, and on the south by...

, Burundi
Burundi
Burundi , officially the Republic of Burundi , is a landlocked country in the Great Lakes region of Eastern Africa bordered by Rwanda to the north, Tanzania to the east and south, and the Democratic Republic of the Congo to the west. Its capital is Bujumbura...

, and the Democratic Republic of the Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...

.

Industry received little external assistance from the end of the war through 1995. Beginning in 1996-97, the government has become increasingly active in helping the industrial sector to restore production through technical and financial assistance, including loan guarantees, economic liberalization, and the privatization of state-owned enterprises. In early 1998, the government set up a one-stop investment promotion center and implemented a new investment code that created an enabling environment for foreign and local investors. An autonomous revenue authority also has begun operation, improving collections and accountability.

Possibilities for economic expansion, however, are limited by inadequate infrastructure and transport and the small available domestic market of Rwanda's predominantly subsistence economy. Existing foreign investment is concentrated in commercial establishments, mining, tea, coffee, and tourism. Minimum wage and social security regulations are in force, and the four prewar independent trade unions are back in operation. The largest union, CESTRAR, was created as an organ of the government but became fully independent with the political reforms introduced by the 1991 constitution. As security in Rwanda improves, the country's nascent tourism sector shows great potential to expand as a source of foreign exchange. Rwanda's tourism is centered around the attractions of Volcanoes National Park
Volcanoes National Park
For the park in Hawaii, see Hawaii Volcanoes National Park.Volcanoes National Park lies in northwestern Rwanda and borders Virunga National Park in the Democratic Republic of Congo and Mgahinga Gorilla National Park in Uganda. The national park is known as a haven for the mountain gorilla...

 (PNV) with its six volcano
Volcano
2. Bedrock3. Conduit 4. Base5. Sill6. Dike7. Layers of ash emitted by the volcano8. Flank| 9. Layers of lava emitted by the volcano10. Throat11. Parasitic cone12. Lava flow13. Vent14. Crater15...

es and its protected population of mountain gorilla
Mountain Gorilla
The Mountain Gorilla is one of the two subspecies of the Eastern Gorilla. There are two populations. One is found in the Virunga volcanic mountains of Central Africa, within three National Parks: Mgahinga, in south-west Uganda; Volcanoes, in north-west Rwanda; and Virunga in the eastern Democratic...

s made famous by Dian Fossey
Dian Fossey
Dian Fossey was an American zoologist who undertook an extensive study of gorilla groups over a period of 18 years. She studied them daily in the mountain forests of Rwanda, initially encouraged to work there by famous anthropologist Louis Leakey...

. Additionally, tourism is drawn to central Africa's largest protected wetland Akagera National Park
Akagera National Park
The Akagera National Park covers 1,200km² in eastern Rwanda, against the Tanzanian border. It was founded in 1934 to protect animals and vegetation in three ecoregions: savannah, mountain and swamp. The park is named for the Kagera River which flows along its eastern boundary feeding into several...

, with its populations of hippopotami
Hippopotamus
The hippopotamus , or hippo, from the ancient Greek for "river horse" , is a large, mostly herbivorous mammal in sub-Saharan Africa, and one of only two extant species in the family Hippopotamidae After the elephant and rhinoceros, the hippopotamus is the third largest land mammal and the heaviest...

, cape buffalo, zebra
Zebra
Zebras are several species of African equids united by their distinctive black and white stripes. Their stripes come in different patterns unique to each individual. They are generally social animals that live in small harems to large herds...

s, elephant
Elephant
Elephants are large land mammals in two extant genera of the family Elephantidae: Elephas and Loxodonta, with the third genus Mammuthus extinct...

s, elands
Taurotragus
Taurotragus, commonly called Eland, is a genus of antelopes of the African savannah, containing two species: the Common Eland and the Giant Eland...

, and other big game animals. Birdwatching
Birdwatching
Birdwatching or birding is the observation of birds as a recreational activity. It can be done with the naked eye, through a visual enhancement device like binoculars and telescopes, or by listening for bird sounds. Birding often involves a significant auditory component, as many bird species are...

-related tourism has a potential to develop as well, especially in Nyungwe National Park, among the largest uncut forest reserves in Africa. Nyungwe National Park is home to over 300 species of birds. And a vast variety of wild life as well.

Finally, several memorial sites associated with the Rwandan genocide have begun generate significant tourism. For example, the Gisozi Genocide Memorial Site in the Gasabo District of Kigali -- the burial place of approximately 300,000 victims of the genocide -- has a related genocide exhibition area and library and has plans to develop a teaching center on the history of the genocide. Another major genocide-related memorial center attracting tourists is the Murambi Genocide Memorial Site housed in the former Murambi Technical School
Murambi Technical School
The Murambi Technical School, now known as the Murambi Genocide Memorial Centre, is situated in the Murambi district in southern Rwanda. It was the site of a massacre during the 1994 Rwandan genocide. When the killings started, Tutsis in the region tried to hide at a local church...

 where 45,000 were murdered and 850 skeletons and mummified remains of the victims are on display. Two other major memorial sites associated with the genocide are in Kicukiro District
Kicukiro District
Kicukiro is a district in Kigali Province, Rwanda. Its headquarters is the Kigali suburb of Kicukiro. Kicukiro is home to a thriving market, a number of NGOs and the Bralirwa Brewery. In addition, it is the headquarters for the Friends Church in Rwanda. Kicukiro District is also home to two major...

: Rebero Genocide Memorial Site where 14,400 victims are buried and the Nyanza-Kicukiro Genocide Memorial Site where 5000 victims were killed after Belgian
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...

 soldiers who serving in the United Nations peacekeeping forces abandoned them. In Kibungo Province
Kibungo Province
Kibungo was a south-eastern province of Rwanda known for its production of bananas. In 2006, it became part of the new Eastern Province.Kibungo Municipality is also a municipality within the province.Districts and municipalities:# District of Rusumo...

, the site of the Nyarubuye Massacre
Nyarubuye massacre
The Nyarubuye massacre is the name given to the killing of an estimated 20,000 civilians on April 15-April 16, 1994 at the Nyarubuye Roman Catholic Church in Kibungo Province, east of the Rwandan capital Kigali. The victims were Tutsis and Hutu moderates who had sought refuge in the church...

 is home to the Nyarubuye Genocide Memorial Site where an estimated 20,000 victims were killed after seeking refuge in the Roman Catholic church and homes of the nuns and priest there.

In the immediate postwar period -- mid-1994 through 1995 -- emergency humanitarian assistance of more than $307.4 million was largely directed to relief efforts in Rwanda and in the refugee camps in neighboring countries where Rwandans fled during the war. In 1996, humanitarian relief aid began to shift to reconstruction and development assistance
Development aid
Development aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...

. The United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...

, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...

, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

, the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...

, the World Bank, the UN Development Programme and the European Development Fund
European Development Fund
The European Development Fund is the main instrument for European Union aid for development cooperation in Africa, the Caribbean, and Pacific countries and the Overseas Countries and Territories...

will continue to account for the substantial aid. Rehabilitation of government infrastructure, in particular the justice system, is an international priority, as is the continued repair and expansion of infrastructure, health facilities, and schools.

External links

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