by high costs of finance, energy, and trans- port, coupled with dominance of SOEs. RWANDA Key conditions and Key reforms should aim to enable compet- itive domestic enterprises, foster innova- challenges tion, develop long-term finance, and foster regional integration. Table 1 2021 Despite exceptional economic perfor- Population, million 13.3 mance in recent decades, including rapid GDP, current US$ billion 11.0 growth in per capita income over GDP per capita, current US$ 828.7 2005–2019, Rwanda faces major develop- Recent developments a 56.5 International poverty rate ($1.9) ment challenges. Poverty rates (measured a 80.3 as US$1.90 a day) fell from 69.1 percent Effective vaccination measures helped Lower middle-income poverty rate ($3.2) a 91.9 in 2005 to 56.5 percent in 2017 and was Rwanda navigate the pandemic. After Upper middle-income poverty rate ($5.5) Gini index a 43.7 projected to fall even further to 52.9 per- grappling with the third—and more se- School enrollment, primary (% gross) b 131.3 cent in 2019 behind strong growth in GDP vere—wave in June–August 2021, Rwan- b 69.0 and private consumption. With the emer- da successfully contained the spread of Life expectancy at birth, years gence of COVID-19, poverty is expected infections while continuing its vaccination Total GHG Emissions (mtCO2e) 8.4 to have increased to 56.0 percent for 2020. campaign. By end-February, about 68 per- Source: WDI, Macro Poverty Outlook, and official data. Rwanda has relatively higher poverty rates cent of the total population had received a/ Most recent value (2016), 2011 PPPs. b/ Most recent WDI value (2019). than African peers with similar income per at least one dose of COVID vaccine, while capita, and poverty reduction has become 60 percent had received two doses. These less responsive to growth in recent years. vaccination rates place Rwanda among Rwanda’s economy grew at around 11 Rwanda now faces challenges in fully the top ten countries in Africa. Rwanda translating its strong growth into commen- started administrating a booster shot dose percent in 2021, as targeted measures surate gains in poverty reduction and in December 2021. helped economic activities to effectively shared prosperity, with the aim of elimi- The economy surged in 2021, growing by navigate the pandemic. The twin deficits nating poverty by 2050. about 11 percent. Gradually easing mobil- remained—requiring more external fi- A shift from public investment-led growth ity restrictions have supported a broad- to the private sector is key to Rwanda’s as- based rebound, stimulating private con- nancing—and are expected to ease below piration of becoming an upper-middle in- sumption, by increasing incomes amid the their pre-crisis levels in 2022–2024. De- come country by 2035 and a high-income reopening of economic activities, and spite an unprecedented assistance pro- country by 2050. Capital accumulation, falling inflation. Household consumption gram, poverty likely increased due to the mostly large-scale public investment in in- made significant contribution to growth, adverse effects of the pandemic on output frastructure, has been the main driver of thanks to government transfers rolled out growth. Limitations of the state-led devel- to households affected by the pandemic. and employment, but is expected to re- opment model have become apparent. La- Government investment spending con- turn to pre-crisis levels in 2022. bor productivity and total factor produc- tributed significantly, accounting for one- tivity are low for its income level. More- third of GDP growth. However, unem- over, the private sector still maintains a rel- ployment continued to be higher relative atively limited presence, restricted in part to the pre-crisis levels as firms were not yet FIGURE 1 Rwanda / Primary deficit, interest payments, and FIGURE 2 Rwanda / Actual and projected poverty rates and public debt real private consumption per capita Percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 16 100 700000 90 600000 12 80 70 500000 8 60 400000 50 40 300000 4 30 200000 20 0 100000 10 0 0 -4 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2016 2017 2018 2019 2020 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate Primary deficit Interest Change in debt Upper middle-income pov. rate Real priv. cons. pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 71 Apr 22 confident about the recovery sustainability (to 5 percent) in mid-February 2022, while improve, raising GDP growth to around and did not hire permanent employees. In continuing to support the recovery. 7 percent over 2022–2024, a lower growth August 2021, the unemployment rate was trajectory than before the pandemic. more than 3 percentage points higher than Rwanda is likely to reach its pre-pandemic in August 2019. trend on its real per capita US$ GDP by The authorities have maintained a fiscal Outlook 2023. The pace of national vaccination expansion to support the recovery amid should be kept up to ensure that 70 percent rising revenues. Total government rev- Short- to medium-term growth prospects of the population 12 years and above is ful- enues (including grants) peaked in 2021, of Rwanda’s economy are positive but con- ly vaccinated by mid-2022. estimated at 25.5 percent of GDP, up from ditional on continued national vaccination, The fiscal deficit is expected to remain ele- 23.6 percent in 2020. Government outlays recovery of the domestic economy, as well vated at around 7.4 percent of GDP in 2022 also increased, reaching 33.3 percent of as the economic consequences of the Russ- before gradually declining as revenues re- GDP in 2021, compared to 32.9 percent in ian invasion in Ukraine. Energy and com- cover and emergency spending subsides. 2020, driven mainly by continued fiscal modity prices (especially wheat) have The deficit is projected to narrow to about support for firms and households affected surged, adding to inflationary pressures 4 percent of GDP in 2024 in line with gov- by the pandemic. The government fast- from supply chain disruptions and hob- ernment commitments. Public debt is fore- tracked a US$250 million package to sup- bling the rebound from the COVID-19 cast to peak in 2023 (Table 2), but Rwanda port private investments in manufacturing pandemic. While the economic conse- remains susceptible to external shocks to and construction. The overall fiscal deficit quences of the Russian invasion, war, and growth and/or exports, and worse-than- eased to 8.2 percent of GDP in 2021, com- associated sanctions are still unfolding, expected external financing conditions, pared to 10.3 percent of GDP in 2020, as Rwanda’s GDP growth is likely to be lower which can be aggravated by a prolonged Rwanda continued to benefit from large than expected in 2022. Commodity prices pandemic and uneven recovery. Rwanda external COVID-related support. and fiscal subsidies are expected to be the needs to identify credible revenue and Driven mainly by rising prices of fresh main channels of the crisis. Even though spending measures for a growth-friendly food and energy products, annual urban poverty is expected to return to pre-crisis fiscal consolidation with a view to reach- inflation rose to 5.8 percent in February levels in 2022 behind expected increases ing their debt anchor within a reasonable and is expected to remain high in 2022. in household consumption, large increases timeframe and further strengthening their In expectation of higher inflationary pres- in food prices have the potential to delay debt management capacity. However, sures from higher international commodi- or even revert these poverty gains. With higher interest payments could put pres- ties, the National Bank of Rwanda raised eased COVID-19 restrictions, domestic de- sure on fiscal space in the medium-term, the policy interest rate by 50 basis points mand and trade are expected to gradually absent revenue reforms. TABLE 2 Rwanda / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 9.5 -3.4 10.9 6.8 7.2 7.4 Private Consumption 5.5 -5.0 8.8 6.2 6.1 5.8 Government Consumption 17.5 1.9 4.3 7.7 7.5 8.3 Gross Fixed Capital Investment 32.1 -4.5 17.0 15.2 7.6 6.6 Exports, Goods and Services 19.9 -9.2 2.8 14.9 16.2 15.7 Imports, Goods and Services 18.0 -3.4 3.6 17.7 11.0 9.3 Real GDP growth, at constant factor prices 8.9 -3.5 10.9 6.8 7.2 7.4 Agriculture 5.0 0.9 5.8 5.5 5.5 5.0 Industry 16.6 -4.2 14.7 10.7 9.2 8.5 Services 8.3 -5.5 12.2 6.0 7.2 8.2 Inflation (Consumer Price Index) 2.4 7.7 0.8 7.2 6.8 5.0 Current Account Balance (% of GDP) -11.9 -12.2 -10.9 -11.8 -11.4 -10.2 Net Foreign Direct Investment (% of GDP) 2.5 1.0 1.9 3.2 3.6 3.7 Fiscal Balance (% of GDP) -9.2 -10.4 -8.4 -7.4 -5.7 -4.2 Debt (% of GDP) 56.8 72.4 74.9 77.9 78.8 76.0 Primary Balance (% of GDP) -7.7 -8.8 -6.3 -5.0 -3.2 -1.8 a,b International poverty rate ($1.9 in 2011 PPP) 52.9 56.0 53.6 51.8 50.4 49.1 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 78.1 80.0 78.6 77.5 76.6 75.8 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 91.1 91.8 91.3 90.8 90.5 90.2 GHG emissions growth (mtCO2e) 2.8 2.1 2.9 3.2 3.3 3.2 Energy related GHG emissions (% of total) 26.1 25.9 25.3 24.6 24.0 23.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2010-EICV-III and 2016-EICV-V.Actual data: 2016. Nowcast: 2017-2021. Forecasts are from 2022 to 2024. b/ Projection using average elasticity (2010-2016) with pass-through = 0.7 based on private consumption per capita in constant LCU. MPO 72 Apr 22