What caused the economic decline of Rwanda in the late 1980s, compared to the impressive economic growth achieved after 1972?

by Somethingcleaver1
ReaperReader

Normally when I talk about the economic outcomes of a particular country at a particular time, I emphasis uncertainty and the complexity of the numerous factors that are driving a modern economy.

For Rwanda, in the late '80s, though, it's much simpler. There was a fall in world coffee prices, Rwanda's main export (at 82% of Rawanda's total export earnings in 1986, tea being the other significant earner). Rwanda was a poor economy, even in 1989 GDP per capita in US$ was only $330. The Rwandan economy had diversified since Independence, manufacturing reached 16% of GDP in 1992 (before the 1994 upheavals), but the Rwandan economy still had a large share of agriculture at 38% in 1987, service made up 40% of GDP). And much manufacturing was tied to agriculture: producing farming tools, or food processing. Therefore the fall in coffee prices hit much of the economy. (Sellstrom, page 19).

The fall in coffee prices and resulting impact on incomes did result in an increase in official development assistance, the total rose from $242m in 1989 to $305m in 1990 and $375m in 1991. The Rwandan government also increased borrowing, total external debt rose from 27% of GDP in 1989 to 51% in 1994.  (table 7, Appendix 1 of Sellstrom), but this was still a bad time economically.

Source:

Tor Sellstrom, Lennart Wohlgemuthm, 1996, The International Response to Conflict and Genocide: Lessons from the Rwanda Experience, Study 1: Historical Perspective: Some Explanatory Factors, The Nordic Africa Institute, Uppsala, Sweden, available at https://www.oecd.org/derec/unitedstates/50189653.pdf, see also https://www.oecd.org/countries/rwanda/4/ for the full study.