Rwanda's balance of payments – Balance of Payments (Senior 6 Economics) | Ganzaa

Balance of Payments

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Senior 6 · Economics

Balance of Payments

4 lessons

Lesson 2 of 4

Rwanda's balance of payments

25 min

The data: five years of Rwanda's accounts

The table gives the BNR's balance of payments for Rwanda, in millions of US dollars. The financial account is shown here as net inflows (positive when more money comes in than goes out); the BNR's own table shows the same numbers with a minus sign, following the IMF convention.

US$ million	2021	2022	2023	2024	2025
A. Current account	−1,203	−1,240	−1,647	−1,960	−1,917
Goods: exports (credit)	1,531	2,112	2,466	3,246	2,449
Goods: imports (debit)	3,190	4,100	4,835	5,671	4,826
Goods balance	−1,659	−1,989	−2,369	−2,426	−2,377
Services balance	−124	10	101	88	89
Primary income balance	−176	−242	−278	−402	−399
Secondary income balance	756	981	898	780	770
of which remittances received	379	461	505	502	640
B. Capital account	422	322	398	383	294
C. Financial account, net inflows	1,110	705	1,283	1,919	1,229
of which direct investment	233	305	445	518	595
of which other investment (mainly loans)	604	460	904	1,422	625
D. Net errors and omissions	−175	85	74	234	96
Change in reserves (+ rise)	154	−129	107	576	−298

Read the data. (1) Which part of the current account is the main cause of the deficit? (2) Which part offsets it most? (3) How was the current account deficit financed in 2024, and why did the reserves fall in 2025?

What the accounts show

A large and persistent current account deficit. It widened from US$1,203 million in 2021 to US$1,960 million in 2024, and narrowed slightly to US$1,917 million in 2025. For the fiscal year 2024–25 the BNR puts it at 12.3% of GDP (13.5% if official transfers are left out).
Goods drive it. The goods deficit alone was larger than the whole current account deficit in every year. Rwanda imports fuel, food, machines and inputs that it cannot yet produce at home.
Services are roughly in balance. Tourism and air transport earn about as much as Rwanda pays for freight, travel abroad and other services.
The primary income deficit is growing. Interest on foreign loans and profits paid to foreign investors are the cost of past borrowing and investment.
Transfers help a lot. Remittances from Rwandans abroad rose strongly, from US$502 million in 2024 to US$640 million in 2025, but grants to the government have fallen, so the secondary income surplus shrank.
Financing comes from project grants (capital account), foreign direct investment and loans (financial account). When these fall short, as in 2022 and 2025, the reserves are run down.

Worked example

Worked example 1: measuring the trends (BNR data)

(a) Growth of payments of income abroad. Primary income debits rose from US$197 million in 2021 to US$431 million in 2025:

\frac{431 - 197}{197} \times 100\% \approx 118.8\%

They more than doubled in four years.

(b) Growth of remittances from 2021 to 2025:

\frac{640 - 379}{379} \times 100\% \approx 68.9\%

(c) How much of the 2025 current account deficit did FDI cover?

\frac{595}{1\,917} \times 100\% \approx 31.0\%

Worked example 2: checking that the accounts balance (2024)

\text{CA} + \text{KA} + \text{FA} + \text{NEO} = -1\,960 + 383 + 1\,919 + 234 = 576

This equals the rise in reserves in the table. In 2024 the inflows of loans and investment were larger than the current account deficit, so the BNR could add US$576 million to its reserves, which covered 5.4 months of prospective imports at the end of the year.

Definition

Current account deficit: a situation in which a country's payments abroad for goods, services, income and transfers exceed its receipts, so that it must borrow, attract investment or run down reserves to cover the gap.

Debt service: the interest and repayments of principal due on a country's loans. Interest appears in primary income; repayments of principal appear in the financial account.

Concessional loan: a loan on softer terms than the market offers (a low interest rate, a long repayment period and a grace period), such as loans from the World Bank's International Development Association.

The balance of payments position of developing countries

Rwanda's pattern is common among low- and middle-income countries, especially small and landlocked ones.

Feature	Why it arises
Persistent current account deficits	Growing economies import capital goods, inputs and fuel faster than exports can grow
A narrow export base of primary products	Earnings depend on a few commodities whose world prices are volatile
Heavy dependence on grants and concessional loans	Domestic saving is too low to finance investment
Rising income payments abroad	Interest on accumulated debt and profits sent home by foreign investors
Limited foreign-exchange reserves	Reserves are small relative to import bills, so shocks bite quickly
High transport and freight costs	Landlocked countries pay neighbours' ports and foreign carriers
Vulnerability to shocks	Fuel price rises, droughts, pandemics or regional conflict hit both exports and imports

Warning

A current account deficit is not automatically bad. Judge it by what it pays for and how it is financed. A deficit that imports machines, financed by FDI or long-term concessional loans, can raise future output and exports. A deficit that imports consumer goods, financed by short-term expensive borrowing or by running down reserves, is a warning sign.

Tip

The four-step answer. For any balance of payments data question: (1) name the balance that is in deficit or surplus and its size; (2) find the main item causing it; (3) say how it was financed; (4) judge whether it is sustainable, using its size relative to GDP, the trend, and the kind of financing.

Important

Discuss. Rwanda's current account deficit was about 12% of GDP in 2024–25. Is it sustainable? Consider what Rwanda imports, the rise in income paid abroad, the fall in grants, the growth of remittances and FDI, and the level of reserves.

EconplusDal, "Causes and Consequences of a Current Account Deficit" (about 9 minutes). Separates demand-side from supply-side causes. Decide which of his causes best fit Rwanda's deficit.

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Practice

Using the table, give the size of Rwanda's current account deficit in 2023 and identify its main cause.
Calculate the percentage change in Rwanda's goods exports between 2024 and 2025.
Show that the accounts balance in 2025, using the table.
Explain why the primary income deficit has grown.
Give four features of the balance of payments of developing countries.
In 2022 Rwanda's reserves fell although its current account deficit was smaller than in 2023. Use the table to explain why.
"Rwanda's current account deficit shows that the economy is weak." Evaluate this statement.

Show answersHide answers

US$1,647 million. The main cause is the goods deficit (US$2,369 million): imports of goods far exceed exports.
$\frac{2\,449 - 3\,246}{3\,246} \times 100\% \approx -24.6\%$ , a fall of about 24.6%.
$-1\,917 + 294 + 1\,229 + 96 = -298$ , equal to the fall in reserves.
Rwanda has borrowed more abroad (so pays more interest) and attracted more FDI (so foreign owners earn and send home more profit): primary income debits rose from US$197 million in 2021 to US$431 million in 2025.
For example: persistent current account deficits; a narrow base of primary exports; dependence on aid and concessional loans; rising income payments abroad; small reserves; high freight costs; vulnerability to shocks.
Net financial inflows were only US$705 million in 2022, against US$1,283 million in 2023. With the capital account (322) and errors (85), inflows did not cover the deficit of 1,240: $-1\,240 + 322 + 705 + 85 = -128$ , so reserves fell by about 129 (the difference is rounding).
Not necessarily. The deficit partly reflects fast growth and imports of capital goods for investment, and it has been financed largely by FDI and long-term loans. But its size (about 12% of GDP), rising income payments, falling grants and reserves that fell in 2025 are risks. A good answer weighs both and concludes.

Sources and credits

Balance of payments 2021–2025 and reserve cover at the end of 2025: Monetary Policy and Financial Stability Statement, March 2026, Table 12, National Bank of Rwanda; the financial account's sign has been reversed to show net inflows as positive. Current account as a share of GDP, 2024–25: Annual Report 2024–2025, Appendix 14, National Bank of Rwanda. Reserve cover at the end of 2024: Monetary Policy and Financial Stability Statement, March 2025.
Photo: Rwandair plane taking off, Ndahiro derrick, via Wikimedia Commons, CC BY-SA 4.0.
Video: Causes and Consequences of a Current Account Deficit, EconplusDal, embedded from YouTube.

Written by Ganzaa: the chart, the tables, the worked examples and the practice items. This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.

1The data: five years of Rwanda's accounts

2What the accounts show

3The balance of payments position of developing countries

The data: five years of Rwanda's accounts

What the accounts show

The balance of payments position of developing countries