Rwanda - Overview of economy

The single biggest factor in Rwanda's recent economic history is the 1994 genocide (see Politics, Government, and Taxation). In that year, Rwanda's ethnic majority, the Hutus, committed genocide against the Tutsi minority. The casualties of that genocide numbered more than half a million Tutsis. The genocide devastated Rwanda's already fragile economy by further impoverishing its population and unraveling its social fabric. The economy shrank by 50 percent within a year of the genocide, and per capita incomes dropped to US$80 a year.

Since the 1994 genocide, however, Rwanda has made significant headway in rehabilitating its economy. Annual gross domestic product (GDP) growth rates hit 37 percent in 1995, 12 percent in 1996 and 1997, and 10 percent in 1998. Inflation fell from its 1994 highs and government revenues increased. Agricultural production reached pre-war levels by 1998, though there is little new investment in this sector. Moreover, nearly 40 percent of the

industries operating in 1994 have not resumed operations. Economic growth slowed in 1999, thanks to low prices for Rwanda's major exports and rising world oil prices.

Today, Rwanda remains a poor country dependent on agricultural production and foreign aid. It is primarily a rural country and about 90 percent of its population works in subsistence agriculture, and 65.3 percent of the population lived below the poverty line in 1998. Its main exports, coffee and tea, account for 70 percent of exports. Rwanda receives 75 percent of its budgetary requirements from foreign aid organizations. The Rwandan government, the International Monetary Fund (IMF), and the World Bank have agreed to a privatization program that is expected to invigorate Rwanda's economy. Future growth in Rwanda's economy, however, will depend on continued political stability, assistance from the IMF and the World Bank, and the strengthening of world coffee and tea prices.