Rwanda’s economy has begun recovering from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to increase from an annual average of 5.4% for 2019 to 2021, to 6.4% in 2022. Inflation is projected to increase from an annual average of 3.7% for 2019 to 2021, to 8.0% in 2022. The elevated inflation is caused by the sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to increase to an annual average of 7.6%. Meanwhile, inflation is projected to decrease to an average of 6.0% over the medium-term from 2023 to 2025.
The Government of Rwanda’s debt has been steadily increasing since 2020. Rwanda’s gross public debt is projected to increase from an annual average of 61.0% of GDP for 2019 to 2021, to 72.0% of GDP in 2022. The increase in public debt is largely due to the Government of Rwanda implementing procyclical fiscal expansion despite the economic recovery from the shock caused by the global lockdown response to the COVID-19 pandemic. The fiscal deficit is projected to narrow slightly from an annual average of -7.1% of GDP for 2019 to 2021, to -6.8% in 2022. This shows the procyclical fiscal stance taken by the government as spending and further borrowing outpace revenue growth. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to narrow to an annual average of -4.5% of GDP. Therefore, public debt is projected to decrease slightly to an average of 71.8% of GDP over the medium-term from 2023 to 2025.
Rwanda’s external sector was largely unaffected by the COVID-19 pandemic in 2020 but the sector has begun deteriorating despite the rebound in commodity prices, which have increased export earnings strengthening the RWF and raising demand for imports. Rwanda’s current account deficit is projected to widen from an annual average of -USD 1.2 billion (approx. -11.4% of GDP) for 2019 to 2021, to -USD 1.4 billion (approx. -11.4% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account deficit is projected to narrow to an annual average of -USD 1.3 billion (approx. -9.0% of GDP). This illustrates a short-lived but persistent deterioration of the current account balance despite the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia. Therefore, Rwandan authorities will have to take a proactive approach to macroeconomic management in order to maintain the RWF strength and invest in further diversification of the country’s exports away from the continued reliance on raw agricultural and mineral commodities.
Rwanda is scheduled to hold its presidential elections in Aug 2024 and the election campaigning cycle still a long way ahead. Incumbent President H.E. Paul Kagame will not be eligible for re-election since he is currently serving a second term in office using his regional integration, peace and stability, and anti-corruption rhetoric. The current political climate remains relatively calm despite economic pressures due to reduce tourism after the COVID-19 pandemic. President H.E. Paul Kagame will also seek to continue playing a meaningful role in resolving conflicts and political tensions in neighbouring states such the Democratic Republic of Congo and Burundi. This remains the central aim in Rwanda’s regional priorities as a member of the EAC and the International Conference on the Great Lakes Region.