Rwanda

Resilient growth despite the inflationary shock

After peaking in 2025, economic growth will slow in 2026 due to rising oil prices, monetary tightening and weaker agricultural performance. Growth is nevertheless expected to remain robust and should pick up again in 2027, driven by continued investment in infrastructure and the dynamism of the services sector. The services sector (52% of GDP in 2025) is the main driver of growth, particularly for information and communication technologies (+22% in 2025), transport (accounting for around 40% of jobs created in 2025) and business tourism, where a significant number of customers arrive by road from neighbouring countries. The expansion of RwandAir and the new Kigali International Airport aims to develop a regional hub to promote foreign direct investment and tourism. The first phase of the airport is expected to come into operation by the end of 2027, enabling it to handle around 8 million passengers a year, double that of the current airport.

Agriculture accounts for a significant share of GDP (15%), employment (39%) and total exports (40%, of which 13% is coffee and 12% is tea). Following the severe floods of 2023-2024 which affected yields, agricultural production rebounded in 2025 (+5%) and continued to grow in the first half of 2026 (+7% in value-added in Q1). The outlook for agriculture remains favourable for the rest of the year but is vulnerable to the El Niño phenomenon expected to occur from late 2026. Yields could therefore be disappointing in 2027. Meanwhile, the secondary sector is expanding rapidly, with growth of 13% expected in 2026. Construction is being driven by major infrastructure projects such as the new airport (a USD 2.6 billion investment) and the extensive programme to upgrade and expand the road network. Furthermore, manufacturing activities (food processing, textiles, construction materials and plastics) are being supported by the government through the Manufacture and Build to Recover Programme in place since 2022. The government is also focusing on minerals, such as lithium, for which several exploration projects are planned, with extraction still largely carried out on a small-scale basis. Last, the rise of the technology sector continues with the creation of a National Artificial Intelligence Agency and the development of an extensive 5G network in partnership with China.

Domestic demand is expected to remain the main driver of growth in 2026–2027. Households play a dominant role in the economy, with their consumption accounting for 72% of GDP in the first quarter of 2026, compared with 14 % for public consumption. Private consumption could, however, be hampered in the short term by sharply rising inflation in 2026, although energy and fertiliser subsidies will partially mitigate the impact. Inflationary pressures stem from several factors that have unfolded since 2025: increases in excise duties on fuel, rises in administered prices (electricity, healthcare), poorer harvests, the war in the Middle East with its resulting oil shock and disruptions to transport, plus the depreciation of the Rwandan franc. Inflation is expected to return to more manageable levels from 2027 onwards, converging towards the 5% target. To contain second-round effects, the National Bank raised its key interest rate in February 2026, from 6.75% to 7.25%, and again in May 2026 to reach 8.25%.

Widening twin deficits

The government’s budget for the 2026-2027 financial year points to a more moderate expansion than that seen in 2025-2026 as the macroeconomic environment deteriorated between the two financial years due to rising inflation and an economic slowdown associated with the conflict in the Middle East. The deficit, at over 5%, widened from 2025-2026 onwards, before showing a slight improvement in 2026-2027. Major public investments are the main cause of the widening deficit, namely the construction of a new airport (40% government, 60% Qatar Airways) and the development of RwandAir (51% government and 49% Qatar Airways). Added to this are pension reforms which involve increasing employer contributions (including the government’s share) from 6% to 12%, as well as rising military expenditure and subsidies. In order to gradually reduce the budget deficit, the government launched a gradual fiscal consolidation strategy in 2025-2026, which was continued in 2026-2027. On the one hand, revenue is expected to grow sustainably with the introduction of several taxes from 2025 onwards: VAT on mobile phones, certain ICT equipment and fuel, increases in excise duties on gambling, cigarettes and beer, plus a tourist tax and an environmental tax. The broadening of the tax base must be supported by increasing electronic invoicing and enforcing tighter controls. At the same time, fiscal consolidation relies on better control of expenditure (falling from 15.3% of GDP in 2025-26 to 15.1% in 2026-27), through cuts to operating expenditure, the prioritisation of public investment and tighter oversight of projects financed by external resources. The programme, accompanied by the 38-month Extended Credit Facility of USD 250 million signed with the IMF in June 2026, is expected to support fiscal consolidation efforts.

Despite the deficit, the public debt-to-GDP ratio is expected to remain broadly stable between 2026 and 2027, supported by strong economic growth and fiscal consolidation efforts. Furthermore, the structure of public debt mitigates refinancing and liquidity risks: external public debt accounts for 59.3% of GDP and more than 80% of total public debt. Nevertheless, debt servicing costs remain high, at 7.2% of GDP, of which 2.3% in interest payments. Almost all the debt has been contracted with multilateral creditors (mainly the IMF, the World Bank and the AfDB) and bilateral creditors on concessional terms, with long maturities (averaging 19 years) and low interest rates. To diversify its sources of financing, Rwanda is seeking to develop its domestic bond market, whose main holders are commercial banks and the Rwanda Social Security Board (RSSB).

The large current account deficit is driven by a structural trade deficit (-14.5% of GDP in 2025): imports far exceed exports, amounting to USD 1.3 billion and USD 0.4 billion respectively in the first quarter of 2026. The high level of imports is largely explained by the construction of the new airport and the acquisition of new aircraft, compounded by higher energy and transport costs. The trade deficit is partly offset by services receipts, although these are themselves weighed down by service imports related to major infrastructure projects, as well as by remittances from Rwandans living abroad. To finance its current account deficit, Rwanda is relying on a sharp increase in foreign direct investment (FDI), which is expected to reach USD 1.07 billion in 2026, mainly in connection with the new Kigali International Airport and RwandAir.

Domestic stability amid a tense regional environment

Paul Kagame, who has led the country since 2000, was unsurprisingly re-elected on 15 July 2024 with more than 99% of the vote. Regularly accused of undermining democratic freedoms through surveillance and the frequent arrest of opposition figures, he is also credited with restoring civil peace, ensuring political stability, significantly reducing poverty (43% in 2023, compared with 75% in 2000) and combating corruption.

At regional level, Rwanda pursues an active foreign policy characterised by interventions driven by security, diplomatic and economic considerations. In eastern DRC, it is involved in the Kivu conflict through its support for the M23, an armed rebel group that presents itself as a defender of Congolese Tutsis, and through the presence of its troops, which has been documented by the UN but is denied by Kigali. According to the Rwandan authorities, this intervention is motivated by security concerns, namely the neutralisation of the FDLR (a Hutu militia that fled the country following the 1994 genocide against the Tutsis and took refuge in eastern Zaire). It is also driven by rivalry with Uganda and Burundi, both of which maintain a military presence in the area. Last, it seeks to secure access to strategic minerals such as coltan, gold and cobalt. The peace agreement signed with the DRC on 5 December 2025 under the auspices of the US and Qatar, provides for the withdrawal of Rwandan troops, the neutralisation of the FDLR and trilateral mining cooperation between the DRC, Rwanda and the US. Meanwhile, in February 2026, the DRC and the M23 signed a framework agreement on the implementation and monitoring of the ceasefire included in their November 2025 framework agreement. On 15 July 2026, which was well beyond the 90-day deadline set out in the agreement for the withdrawal of Rwandan troops, no significant changes had been observed. Fighting continued in several locations across South Kivu. Nevertheless, given the level of international involvement, an escalation into open military conflict between the two countries appears unlikely.

Relations between Rwanda and Western countries have deteriorated as a result of the conflict in the DRC. While the European Union remains a major economic and diplomatic partner, it imposed sanctions in March 2025 on several individuals linked to the conflict, as well as on the country's main gold refinery. More recently, the EU announced that it would not disburse the planned EUR 20 million in support to the Rwanda Defence Force (RDF) which is deployed in Mozambique against Islamic government-linked jihadists. In early 2026, the US followed suit by imposing sanctions on the RDF, four senior military officers and the same refinery.

Last updated: July 2026