Rwanda’s export base remains narrow and concentrated, primarily consisting of primary commodities like tea, coffee, and minerals, with limited diversification into higher value-added products. Despite progress in trade openness and logistics, the country faces persistent structural challenges hindering export growth. Key issues include high logistics costs, limited value addition, weak integration into global value chains (GVCs), and a narrow range of trading partners. The trade deficit, averaging above 10% of GDP, reflects these structural weaknesses, driven by weak exports and strong import demand. While export performance shows some dynamism, with growing shares in agro-processing, light manufacturing, and digital services, the overall sophistication of exports has declined due to the rising dominance of gold. Rwanda’s participation in GVCs is primarily downstream, with limited upstream engagement.
The report identifies several impediments to export diversification and growth. Geography and landlocked status exacerbate logistics challenges and increase transportation costs, limiting export expansion. Rwanda ranks low in global logistics performance, despite improvements in the past. Human capital gaps, with lower-than-regional human development indicators, hinder the development of sectors like ICT, agro-processing, and light manufacturing. Institutional quality, while strong relative to other SSA countries, faces challenges in reducing the prominence of state-owned enterprises (SOEs) in competitive sectors and improving SOE governance.
Price competitiveness has improved due to sustained nominal and real depreciation, but structural factors remain the main impediment to external sustainability. The report suggests policy priorities to unlock Rwanda’s export potential. These include addressing logistics and infrastructure bottlenecks through investments in dry ports, customs modernization, and strategic infrastructure projects like the New Kigali International Airport. Improving the business environment involves reducing the role of SOEs, strengthening SOE governance, and ensuring a level playing field for private investment. Capitalizing on regional integration through deeper participation in the EAC and AfCFTA can expand market access and attract FDI. Safeguarding price competitiveness requires maintaining inflation close to target while allowing exchange rate flexibility, complemented by structural reforms to address high trade costs and narrow the export base.
