Rwanda - Future trends

After the 1994 war and genocide, the Rwandan government focused on establishing peace within its territory and repatriating refugees, mostly from the Congo. The Rwandan economy, as a result of the war, had reached rock bottom. In 1995, the GDP rebounded by 37 percent after the cessation of hostilities allowed the Rwandan citizenry to return to its normal affairs. This normalization of the Rwandan economy continued in 1996 and resulted in a GDP growth of 15.8 percent. That year, the agricultural sector grew by 10 percent, livestock production by 17 percent, and the manufacturing sector by 25 percent. In 1998, Rwanda set upon an ambitious privatization program encouraged by the World Bank and also signed an Enhanced Structural Adjustment Facility with the IMF, both of which were designed to provide order to the economy and encourage economic growth. This same year, Rwanda's economy grew by 9.5 percent and in 1999 by 5.9 percent. Unfortunately, the country experienced a drought which caused extensive crop failure in 2000. The economy, however, is still expected to grow by at least 5.8 percent for the next 3 years. After the 1994 war, inflation had risen to 64 percent. Since then, inflation has come down to around 5 to 7 percent. Admirably, by 1998, the country's GDP surpassed its pre-war level.

Rwanda faces 2 major threats to its continued economic progress: its support of the rebel groups at war with the government of the Congo, and HIV/AIDS. With respect to the first threat, the IMF blames Rwanda's poor coffee production on the fact that Rwanda has diverted indispensable resources needed for coffee production to fund the rebel groups operating in the Congo. Particularly, the IMF contends that unless funding for the rebel groups ceases, Rwanda will be unable to finance the replacement of the aging Arabica trees with newer high-yield trees, and if that is not done, Rwandan coffee production will continue to fall. Both the IMF and the European Union have warned Rwanda that if it does not keep its military expenditures below 2 percent of GDP, they may curtail their funding. With respect to the second threat, 11 percent of the rural Rwandan population is infected with the AIDS virus and that number is growing exponentially. If the Rwandan government fails to implement effective prevention and treatment programs, Rwanda may begin to experience very severe strains on its labor and budgetary expenses.

Prior to 2000, Rwanda had fallen behind in some of its external debt repayments in some bilateral agreements. But as of 2000, Rwanda was not in arrears to either the World Bank or the IMF. Based on this good credit, the IMF has approved a 3-year program with total disbursements of US$56.3 million. Equally important to Rwanda's continued progress is the fact that the IMF and the World Bank have stated that Rwanda qualifies for debt relief under the Highly Indebted Poor Countries program. But these donors, however, made clear that this debt relief is contingent on Rwanda disentangling itself from the Congo war.