Publication: Rwanda Economic Update, April 2025: Modernizing Agriculture to Accelerate Structural Transformation
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2025-04-01
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2025-04-01
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Rwanda’s economy remained resilient in 2024, with GDP growth reaching 8.9 percent, driven by strong performances in services, industry, and a rebound in agriculture. Despite strong export growth, the current account deficit widened due to decline in official transfers. This necessitated continued reliance on forex inflows from FDI and external concessional borrowing. Inflation moderated, averaging 4.8 percent in 2024, due to lower food prices and tight monetary policy, allowing the central bank to ease interest rates by reducing the Central Bank Rate (CBR) from 7.5 percent to 6.5 percent in 2024. The fiscal position improved with higher tax collections supporting fiscal consolidation, though public debt is projected to peak at 80 percent of GDP in 2025, despite reduced borrowing needs, before gradually declining, driven by past deficits and exchange rate depreciation. Rwanda’s agriculture sector remains a cornerstone of the economy, employing 43 percent of the workforce and contributing 27 percent to GDP. Despite diversification beyond traditional cash crops like coffee and tea, agricultural productivity remains constrained by land fragmentation, limited mechanization, post-harvest losses, and climate change impacts. While agricultural exports account for 37 percent of total export revenues, trade remains vulnerable to price fluctuations, and regional market integration is underdeveloped. The sector has much more potential to deliver higher growth, better jobs and boost forex earnings. Part 2 of this report focuses on how to unlock this potential. It examines key drivers of agricultural productivity, including input use, irrigation expansion, mechanization, and digital innovation, while evaluating persistent challenges such as limited access to finance, weak extension services, and climate vulnerability. It assesses policy efforts under the Fifth Strategic Plan for Agriculture Transformation (PSTA5), which aims to modernize production, enhance market access, and transition toward a more private sector-driven model. Key recommendations include strengthening seed systems, expanding irrigation, investing in agro-logistics, improving financial access, and implementing regulatory reforms to attract private investment. By addressing these structural bottlenecks and aligning policies with regional and global trade opportunities in the East African Community (EAC) and the African Continental Free Trade Area (AfCFTA), Rwanda can build a resilient, competitive, and sustainable agri-food sector that supports economic transformation and food security.
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“World Bank. 2025. Rwanda Economic Update, April 2025: Modernizing Agriculture to Accelerate Structural Transformation. © World Bank. http://hdl.handle.net/10986/43007 License: CC BY-NC 3.0 IGO.”
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