2020 Index of Economic Freedom

Rwanda

OVERALL SCORE70.9
WORLD RANK33
Rule of Law

Property Rights76.5

Judicial Effectiveness78.3

Government Integrity57.6

Government Size

Tax Burden79.2

Government Spending79.8

Fiscal Health86.7

Regulatory Efficiency

Business Freedom60.3

Labor Freedom81.8

Monetary Freedom79.8

Open Markets

Trade Freedom70.4

Investment Freedom60.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 12.0 million
  • GDP (PPP):
    • $27.4 billion
    • 8.6% growth
    • 7.4% 5-year compound annual growth
    • $2,280 per capita
  • Unemployment:
    • 1.0%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $398.5 million

Rwanda’s economic freedom score is 70.9, making its economy the 33rd freest in the 2020 Index. Its overall score has decreased by 0.2 point due to a drop in the government integrity score. Rwanda is ranked 2nd among 47 countries in the Sub-Saharan Africa region, and its overall score is well above the regional and world averages.

This is the second year that the Rwandan economy has been rated mostly free after eight years in the moderately free category. GDP growth has been booming for the past five years, driven by export-focused agriculture and a high level of private investment inflows.

To climb higher in the mostly free ranks, the government needs to focus on two lagging Index indicators that are holding back economic freedom. Rwanda is already known as the region’s most business-friendly country, but it needs to do more to attract investment. Also, the president’s commitment to fighting corruption must be bolstered to improve government integrity.

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Background

Decades of violence followed Rwanda’s independence from Belgium in 1959. In 1994, Paul Kagame’s Tutsi-led Rwandan Patriotic Front seized power after state-sponsored genocide killed an estimated 800,000 people, primarily Tutsis. Kagame has been president since 2000 and was reelected to seven-year terms in 2010 and 2017 amid allegations of fraud, intimidation, and violence. In 2015, voters approved a constitutional change that would permit the 62-year-old Kagame to govern until 2034 and strengthen his authoritarian rule. A border standoff with Uganda began in 2019 as each side accused the other of trying to overthrow its government. Tourism, minerals, coffee, and tea are the main sources of foreign exchange. Although poverty remains widespread, government figures indicate that it has been declining rapidly.

Rule of LawView Methodology

Property Rights 76.5 Create a Graph using this measurement

Judicial Effectiveness 78.3 Create a Graph using this measurement

Government Integrity 57.6 Create a Graph using this measurement

The law protects and facilitates acquisition and disposition of property, but the government has been criticized for seizing land for infrastructure and development projects without proper compensation. The judiciary lacks independence from the executive and suffers from a lack of resources and a heavy case backlog. Rwanda is rated among the least corrupt African countries in Transparency International’s 2018 Corruption Perceptions Index.

Government SizeView Methodology

The top personal income and corporate tax rates are 30 percent. Other taxes include value-added and property transfer taxes. The overall tax burden equals 16.6 percent of total domestic income. Government spending has amounted to 26 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 40.7 percent of GDP.

Regulatory EfficiencyView Methodology

Recent pro-business regulatory reforms include improvements in getting electricity and enforcing contracts, among others, but resolution of insolvency was made more difficult. A 2018 labor law contained a mixture of pro-employee and pro-business provisions the ultimate impact of which is uncertain. The government subsidizes agriculture, maintains price controls, and subsidizes power for the 20 percent of the population that has access to electricity.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 51.5 percent of GDP. The average applied tariff rate is 7.3 percent, and 30 nontariff measures are in force. Most sectors are open to foreign investment, but the investment regime is still evolving and has not yet produced a dynamic expansion of new investment. Despite some progress, the cost of financing remains high, and access to banking services is limited.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius74.91.9
2Rwanda70.9-0.2
3Botswana69.60.1
4Seychelles64.32.9
5Cabo Verde63.60.5
6Tanzania61.71.5
7Namibia60.92.2
8Madagascar60.53.9
9Côte d'Ivoire 59.7-2.7
10Uganda59.5-0.2
11Ghana59.41.9
12South Africa58.80.5
13Senegal581.7
14Nigeria57.2-0.1
15Burkina Faso56.7-2.7
16Gabon56.70.4
17Guinea56.50.8
18The Gambia56.33.9
19São Tomé and Príncipe 56.22.2
20Mali55.9-2.2
21Mauritania55.3-0.4
22Eswatini55.30.6
23Kenya55.30.2
24Benin55.2-0.1
25Niger54.73.1
26Lesotho54.51.4
27Togo54.13.8
28Comoros53.7-1.7
29Cameroon53.61.2
30Ethiopia53.60.0
31Zambia53.5-0.1
32Guinea-Bissau53.3-0.7
33Djibouti52.95.8
34Malawi52.81.4
35Angola52.21.6
36Central African Republic50.71.6
37Mozambique 50.51.9
38Chad50.20.3
39Democratic Republic of Congo49.5-0.8
40Liberia49-0.7
41Burundi490.1
42Equatorial Guinea48.37.3
43Sierra Leone480.5
44Sudan45-2.7
45Zimbabwe43.12.7
46Republic of Congo 41.82.1
47Eritrea38.5-0.4
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