2014 Index of Economic Freedom

Rwanda

overall score64.7
world rank65
Rule of Law

Property Rights30.0

Freedom From Corruption46.9

Limited Government

Government Spending78.2

Fiscal Freedom80.3

Regulatory Efficiency

Business Freedom69.6

Labor Freedom84.1

Monetary Freedom74.8

Open Markets

Trade Freedom77.7

Investment Freedom65.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 10.4 million
  • GDP (PPP):
    • $15.5 billion
    • 7.7% growth
    • 8.5% 5-year compound annual growth
    • $1,486 per capita
  • Unemployment:
  • Inflation (CPI):
    • 6.3%
  • FDI Inflow:
    • $159.8 million
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Rwanda’s economic freedom score is 64.7, making its economy the 65th freest in the 2014 Index. Its score is 0.6 point better than last year, reflecting improvements in the management of government spending, business freedom, and labor freedom. Rwanda is ranked 4th out of 46 countries in the Sub-Saharan Africa region, and its score exceeds the world average.

Over the 20-year history of the Index, Rwanda has improved its economic freedom score by 26.4 points, the fifth-best increase of any country. Recording score improvements in nine of the 10 economic freedoms, Rwanda has advanced from economic repression 20 years ago to a “moderately free” economy today.

Nonetheless, substantial challenges remain, particularly in implementing deeper institutional and systemic reforms that are critical to strengthening the foundations of economic freedom. While the security situation is more stable, the absence of a well-functioning legal system undermines protection of property rights and efforts to eradicate corruption.

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Background

Decades of ethnic tension culminated in April 1994 in the genocidal slaughter of an estimated one million Tutsis and moderate Hutus. After now-President Paul Kagame’s Tutsi-led Rwandan Patriotic Front seized power in July 1994, millions of Hutus fled to the Democratic Republic of Congo. Kagame was elected president in 2000 and re-elected in August 2010 amid allegations of fraud, voter intimidation, and violence. He has since focused on political reconciliation and rebuilding Rwanda’s shattered economy. In September 2013 parliamentary elections, the RPF gained a resounding victory. In July 2012, the U.N. criticized Kagame for supporting the M23 rebel group in the DRC, and the U.S., the Netherlands, and Germany suspended aid. Economic reforms have encouraged recovery, but the government has constrained political and media freedoms. Despite strong growth based on tourism and exports of coffee and tea, there is widespread poverty. Over 80 percent of Rwandans depend on subsistence agriculture.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 46.9 Create a Graph using this measurement

Government countermeasures have helped to limit corruption, though graft remains a problem. In recent years, a number of senior government officials have been fired and have faced prosecution for alleged corruption, embezzlement, and abuse of power. Recent improvements in the judicial system include improved training and revisions of the legal code, but the judiciary has yet to secure full independence from the executive.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and a property transfer tax. the overall tax burden equals 13.1 percent of the domestic economy. The government is still reliant on aid flows; however, domestic revenue has reached new highs. Public expenditures are 27 percent of GDP, and government debt is below 30 percent of the size of the economy.

Regulatory EfficiencyView Methodology

Launching a company takes two procedures and two days, and no minimum capital is required. Licensing requirements still cost over three times the level of average annual income. With relatively flexible labor regulations in place, the labor market continues to evolve. The government sets maximum prices for automotive fuels and subsidizes power for the 20 percent of the population that has access to electricity.

Open MarketsView Methodology

The average tariff rate for Rwanda is 6.1 percent, and there are few formal non-tariff barriers to trade. Foreign and domestic investors are formally treated equally under the law, but some mining companies have made allegations of expropriation without full compensation. The financial sector is small but growing. Despite progress, the high costs of financing and limited access to credit remain serious challenges for entrepreneurs.

Country's Score Over Time

Bar Graph of Rwanda Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Rwanda to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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