Rwanda is landlocked and densely populated. It has relatively few exploitable resources and most people are engaged in subsistence agriculture, which in 2012 contributed about 35 per cent of GDP. Water resources are unevenly spread across the country and some areas experience periodic droughts. Commercial cultivation of coffee and tea was introduced by the colonial administration in the first half of the 20th century.
During the long period of intercommunal conflict and massive displacement of people that lasted from independence in 1962 to the establishment in 1994 of the government of national unity led by the Rwandan Patriotic Front, development and diversification of economy and investment in infrastructure and education were on hold.
From 1994, with the strong support of the international donor community and a large injection of aid, the government embarked on a programme of economic reforms, which aimed to grow the private sector and develop a market economy, and to promote investment in coffee, tea and minerals production. Foreign direct investment grew more slowly than aid.
The 2000s also saw large-scale privatisation in the utilities, transport and mining sectors and the emergence of new industries such as eco-tourism and electricity generation from methane gas at Lake Kivu. Growth in mining activity and of exports of minerals such as cassiterite (a tin ore), coltan (a metallic ore containing niobium and tantalum) and wolfram (tungsten) reduced the country’s dependence on exports of coffee and tea.
Rwanda’s external debt was substantially reduced when it reached completion point under the IMF/World Bank Heavily Indebted Poor Countries Initiative in March 2005 and qualified for the Multilateral Debt Relief Initiative in March 2006, bringing about a fall in external debt to 17 per cent of GDP in 2006.
With peace and stable democratic government, strong economic growth ensued, averaging more than ten per cent p.a. over 1996–2002, albeit much less on a per capita basis. It then slowed to 5.6 per cent p.a. during 2003–07 before strengthening to 11.2 per cent in 2008 and an average of about seven per cent p.a. in 2009–15. It was hardly affected by the world economic downturn of 2008–09.