Economic Growth and Poverty Reduction in Rwanda

Rwanda, as many other developing countries, embarked into the process of poverty reduction and economic growth in the aftermath of the 1994 Genocide against Tutsi. After this period of tragedy, the country introduced a number of policies to address the immediate challenges towards reducing poverty and improve people’s livelihoods. Since then, important changes have been observed in the economic, social, and governance (including justice) sectors.

Rwanda is now increasingly seen as a model for economic growth and a stable country in Africa. Real GDP has multiplied by more than 7 in the last 20 years, the growth is coupled with its high stability which makes the country as part of Africa Stable growers; a growth that is mainly explained by the service sector especially in the last decade. This growth and good trends in poverty reduction has incited a number of policy and research questions both nationally and worldwide. One important question is to demonstrate the extent to which on-going economic growth policies, programmes and home-grown initiatives have translated into poverty reduction in Rwanda. The contribution of this paper is to establish knowledge of how and whether the observed economic growth in the past has been pro-poor and identify what are the enablers and constraints of poverty reduction in Rwanda.

Findings of this paper substantiate how the observed economic growth has been mainly driven by the service sector as this contribute about 49.7% on average to the real GDP. Poverty has reduced by 19.8% while extreme poverty has reduced by 23.7% during 2001 and 2015. This implies that, although achieving zero poverty is ambitious, reducing poverty and ensure sustainable growth is possible in the mid-to long term. We also learn from the findings that poverty reduction interventions will need to concentrate further efforts in rural areas. The results have associated poverty prevalence within the population in rural areas than in the urban. The on-going urbanization and secondary cities policy in Rwanda is expected to contribute further to poverty reduction, especially in creating infrastructures needed for efficient economic transactions.these results show a stable, high, and pro-poor economic growth. There is substantial poverty reduction resulting mainly from inclusive model of economic development. However, further investigation is needed to better understand what will be the sustaining factors in the future growth by focusing on the role of economic productivity, public investment, and their interaction in Rwanda.

Authors: A.R. Bizoza and A. Simons

Download the report here