2015 Index of Economic Freedom

Rwanda

overall score64.8
world rank65
Rule of Law

Property Rights30.0

Freedom From Corruption53.0

Limited Government

Government Spending79.2

Fiscal Freedom80.2

Regulatory Efficiency

Business Freedom59.5

Labor Freedom84.5

Monetary Freedom76.0

Open Markets

Trade Freedom80.8

Investment Freedom65.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 10.6 million
  • GDP (PPP):
    • $16.4 billion
    • 5.0% growth
    • 6.9% 5-year compound annual growth
    • $1,538 per capita
  • Unemployment:
    • 0.6%
  • Inflation (CPI):
    • 4.2%
  • FDI Inflow:
    • $110.8 million
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Rwanda’s economic freedom score is 64.8, making its economy the 65th freest in the 2015 Index. Its score remains essentially the same as last year’s, with improvements in half of the 10 economic freedoms, including freedom from corruption and trade freedom, undermined by a significant decline in business freedom. Rwanda is ranked 4th out of 46 countries in the Sub-Saharan Africa region, and its score exceeds the world average.

Over the past five years, economic freedom in Rwanda has advanced by 2.1 points, led by 20-point and 15-point improvements in freedom from corruption and investment freedom, respectively. Efforts to reform the economy have contributed to sustained economic growth and poverty reduction.

However, the government’s reform efforts have not yet fully restored the institutions and structures previously undermined by political unrest and civil war. An increasingly authoritarian president has restricted judicial independence. Meanwhile, corruption continues to undermine public trust. An underdeveloped financial system leads to a high cost of financing and discourages many of Rwanda’s citizens from opening formal bank accounts.

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Background

Paul Kagame’s Tutsi-led Rwandan Patriotic Front (RPF) seized power in July 1994 in the wake of the state-sponsored genocidal slaughter of an estimated 800,000 Tutsis. Kagame was elected president in 2000 and re-elected in August 2010 amid allegations of fraud, intimidation, and violence. His RPF won a resounding victory in the September 2013 parliamentary elections. In July 2012, the U.N. accused Kagame of supporting the M23 rebels in the Democratic Republic of Congo. The U.S., the Netherlands, and Germany subsequently suspended aid. In 2014, the DRC and Rwanda deployed troops to their shared border in response to cross-border violence. The economy is still recovering from the genocide and civil war. Rwanda remains highly dependent on foreign aid and has a goal of transforming its economy from agriculture-based to service-oriented by 2020.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 53.0 Create a Graph using this measurement

Measures to foster a better business environment and improve government transparency and accountability have helped to limit corruption, though graft remains a problem. 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. A nationwide land registration program is being implemented.

Limited GovernmentView Methodology

Rwanda’s top individual and corporate income tax rates are 30 percent. Other taxes include a value-added tax and a property transfer tax. Total tax revenue amounts to 13.6 percent of domestic output, and government expenditures are equal to 26.3 percent of domestic production. Public debt is equivalent to 29 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Incorporating a business takes eight procedures and about a week on average, with no minimum capital required, but regulatory reform has slowed. Labor regulations are more flexible, but a more vibrant formal labor market has yet to develop. The state sets maximum prices for automotive fuels and subsidizes power for the 20 percent of the population with access to electricity.

Open MarketsView Methodology

Rwanda’s average tariff rate is 4.6 percent. Non-tariff barriers are relatively low. There are concerns that an “abandoned property” law enacted in 2014 may make it easier for the government to expropriate property. Financial markets consist mainly of banks, which have been expanding their services. The capital market continues to grow, but the cost of financing remains relatively high.

Country's Score Over Time

Bar Graph of Rwanda Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Mauritius76.4-0.1
2Botswana69.8-2.2
3Cabo Verde66.40.3
4Rwanda64.80.1
5Ghana63-1.2
6South Africa62.60.1
7Madagascar61.70.0
8Swaziland59.9-1.3
9Uganda59.7-0.2
10Namibia59.60.2
11Benin58.81.7
12Zambia58.7-1.7
13Burkina Faso58.6-0.3
14Côte d'Ivoire 58.50.8
15Gabon58.30.5
16Senegal57.82.4
17Tanzania57.5-0.3
18Djibouti57.51.6
19The Gambia57.5-2.0
20Seychelles57.51.3
21Mali56.40.9
22Nigeria55.61.3
23Kenya55.6-1.5
24Mozambique 54.8-0.2
25Malawi54.8-0.6
26Niger54.6-0.5
27Burundi53.72.3
28Mauritania53.30.1
29São Tomé and Príncipe 53.34.5
30Togo533.1
31Liberia52.70.3
32Comoros52.10.7
33Guinea52.1-1.4
34Guinea-Bissau520.7
35Cameroon51.9-0.7
36Sierra Leone51.71.2
37Ethiopia51.51.5
38Lesotho49.60.1
39Angola47.90.2
40Chad45.91.4
41Central African Republic45.9-0.8
42Democratic Republic of Congo454.4
43Republic of Congo 42.7-1.0
44Equatorial Guinea40.4-4.0
45Eritrea38.90.4
46Zimbabwe37.62.1
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