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Rwanda ranks 3rd African country of economic freedom

Heritage Foundation publishes Index of economic freedom 2017, ranking Rwanda on 51st worldwide, and 3rd of Africa. The Kagame’s increasingly authoritarian rule is one of the basis, as he put in place a moderate tax rates framework, conducive to private-sector development. This made Rwanda to achieve annual economic growth of approximately 7 percent over the past three years.

Founded in 1973, The Heritage Foundation is a research and educational institution—a think tank—whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.

For over two decades, the Index of Economic Freedom has measured the impact of liberty and free markets around the globe, and the 2017 Index confirms the formidable positive relationship between economic freedom and progress.

Findings ranks countries in categories, where no African country appear in the first (Free: 100-80), while the second of Mostly free: 80-70, Mauritius is 21st, with 74.7 and Botswana 34th, 70.1%. Rwanda comes in moderately free, on 51st position, with 67.6%.

Rwanda, least corrupt country and welcoming investors

The index says, Rwanda’s adoption of structural reforms has facilitated the emergence of entrepreneurial activity and transformed the once conflict-ridden country into a more open economy. Personal and corporate tax rates are moderate. With a sound regulatory framework that is conducive to private-sector development, Rwanda has achieved annual economic growth of approximately 7 percent over the past three years.

Overall economic freedom, however, is held back by lingering institutional weaknesses that are interrelated. Although foreign investment is welcome, political instability is a major deterrent. There have been ongoing efforts to strengthen the financial sector, create infrastructure, and improve expenditure management, but tangible progress has been elusive. The judicial system lacks independence and transparency.

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Paul Kagame and Rwandan Patriotic Front (RPF) seized power in July 1994 in the wake of the state-sponsored genocide that killed more than a million people, mostly Tutsis.He has been president since 2000, and poverty has been declining rapidly. In 2015, in a move that drew criticism from countries concerned about Kagame’s increasingly authoritarian rule, Rwandans voted overwhelmingly to amend the constitution to allow Kagame in theory to govern until 2034.

The law protects and facilitates the acquisition and disposition of private rights in property. There have been some recent improvements in the judicial system, including improved training and revisions of the legal code, but the judiciary has yet to secure full independence from the executive. Rwanda is among the least corrupt countries in Africa and is ranked 44th in the world in Transparency International’s 2015 Corruption Perceptions Index.

The top personal income and corporate tax rates are 30 percent. Other taxes include a value-added tax and a property transfer tax. The overall tax burden equals 14.9 percent of total domestic income. Government spending has amounted to 27.5 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.0 percent of GDP. Public debt is equivalent to 34.6 percent of GDP.

Regulatory reform measures have contributed to a more favorable business environment, although the pace of reform has slowed in recent years. Labor regulations are relatively flexible, but a more vibrant formal labor market has yet to develop. The government subsidizes agriculture, maintains price controls, and subsidizes power for the 20 percent of the population that has access to electricity.

Trade is moderately important to Rwanda’s economy; the value of exports and imports taken together equals 45 percent of GDP. The average applied tariff rate is 7.4 percent. Foreign investors may lease but not own land. Many state-owned enterprises have been privatized. The financial sector continues to evolve, but the high costs of financing and limited access to credit still pose serious challenges for potential entrepreneurs.

The top ten of the index are: Hong Kong, Singapore, New Zealand, Switzerland, Australia, Estonia, Canada, UAE (Dubai), Ireland and Chile.

African countries: Mauritius (21), Botswana(34), Rwanda(51), Cote d’Ivoire(75), Namibia(78), South Africa(81), Seychelles(85), Morocco(86), Trinidad& Tobago(87) and  Uganda(91).

Other countries of the region rank as follow: Tanzania (105), DRC (117), Kenya (135), Burundi (139). Somalia is among non-ranked countries.

Jean Baptiste Karegeya

 

 

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