Rwanda's Dependency on Foreign Aid and How it Affects the GDP: A Critical Analysis of Rwanda's Future Economy

International Journal of Economics and Management Studies

© 2023 by SSRG - IJEMS Journal

Volume 10 Issue 6

Year of Publication : 2023

Authors : Dheer Chawla

10.14445/23939125/IJEMS-V10I6P101

How to Cite?

Dheer Chawla, "Rwanda's Dependency on Foreign Aid and How it Affects the GDP: A Critical Analysis of Rwanda's Future Economy," SSRG International Journal of Economics and Management Studies, vol. 10,  no. 6, pp. 1-6, 2023. Crossref, https://doi.org/10.14445/23939125/IJEMS-V10I6P101

Abstract:

This paper examines the impact of foreign aid on Rwanda's economic growth and resource efficiency. Despite being aid-dependent, Rwanda has made significant development progress. The study focuses on political alliances, policy environment, and determinants of foreign aid. It highlights Rwanda's transition from agriculture to a diversified economy, emphasizing tourism, manufacturing, and services. Rwanda has experienced economic changes since the early 1990s, recovering from the 1994 genocide. Prioritizing tourism, ICT, and manufacturing led to substantial GDP growth and reduced reliance on agriculture. Exports, including coffee, tea, minerals, and tourism services, flourished. Foreign direct investment (FDI) arrived in manufacturing, infrastructure, services, agriculture, and ICT. Challenges remain, including limited financing access, infrastructure constraints, and high transport costs. Continued support is crucial for sectors like manufacturing, infrastructure, and agribusiness. Gender equality and women's empowerment are vital in entrepreneurship, agriculture, education, and political participation. The study examines Rwanda's tax regime for foreign companies, establishing a fair and transparent business environment. It provides an overview of value-added tax, corporate income tax, capital gains tax, and withholding tax applicable to foreign entities. In conclusion, this paper sheds light on Rwanda's development journey, emphasizing the complex relationship between foreign aid, economic growth, and diversification. It underscores the need to reduce aid dependency, foster sustainable growth, address infrastructure and financing challenges, and ensure gender equality for Rwanda's long-term development.

Keywords:

Economic growth, Export, Foreign aid, GDP, Rwanda.

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