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- GDP (PPP):
- $13.7 billion
- 8.8% growth
- 7.4% 5-year compound annual growth
- $1,341 per capita
- Inflation (CPI):
- FDI Inflow:
Rwanda’s economic freedom score is 64.1, making its economy the 63rd freest in the 2013 Index. Its score is 0.8 point worse than last year, with substantial gains in freedom from corruption and investment freedom outweighed by declines in labor freedom, business freedom, and property rights. Rwanda is ranked 3rd out of 46 countries in the Sub-Saharan Africa region.
Despite the difficult global economic environment, Rwanda’s economy has expanded at an average rate of over 10 percent during the past five years. Foreign direct investment has picked up over the same period. Much-needed regulatory reforms have been undertaken in various sectors of the economy, enhancing the efficiency of the business environment.
However, Rwanda continues to face significant institutional challenges in furthering its transition to a modern, open, market-based system. The foundations of economic freedom are fragile, and while the security situation has become more stable, the absence of a well-functioning legal system undermines protection of property rights and holds back efforts to eradicate lingering corruption.
Decades of ethnic tension culminated in 1994 in the genocidal slaughter of an estimated one million Tutsis and moderate Hutus. After President Paul Kagame’s Tutsi-led Rwandan Patriotic Front seized power, millions of Hutus fled to the Democratic Republic of Congo. Rwandan forces have entered the DRC repeatedly to confront Hutu militia. The U.N. criticized Kagame in July 2012 for supporting the M23 rebel group in the eastern DRC. Kagame, who has focused on political reconciliation and rebuilding Rwanda’s shattered economy, was re-elected in August 2010 amid allegations of fraud, voter intimidation, and violence. 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, poverty remains widespread, and over 80 percent of Rwandans depend on subsistence agriculture.
The legal framework under Rwanda’s authoritarian government is not adequate to maintain respect for the rule of law or provide strong protection for property rights. The judiciary remains vulnerable to political interference. Administrative inefficiency causes delays in the courts. Enforcement of intellectual property rights is not effective, and trading of counterfeit goods continues. Despite some progress, corruption is still considered significant.
The top 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 12.6 percent of total domestic income. Government spending has risen to 28.3 percent of GDP, with the budget balance recording small surpluses in recent years. Public debt has hovered at around 20 percent of total domestic output. Infrastructure spending has increased expenditures this year.
Impressive regulatory reforms since 2008 have enhanced the business environment, although the pace of reform has slowed. With no minimum capital required, launching a company takes only two procedures. Licensing requirements still cost almost three times the level of average annual income. An increase in the minimum wage has exceeded labor productivity growth, undercutting hiring flexibility. Inflationary pressure is increasing.
The trade-weighted average tariff rate is 6 percent, and non-tariff barriers add to the cost of trade. Domestic and foreign investors officially receive equal treatment, and most sectors of the economy are open to foreign investment. However, the investment regime is still evolving and is not conducive to dynamic expansion of investment in new production. The cost of financing remains high, and access to banking services continues to be limited.