On any day in the Mateus area of Kigali, there will always be large flow of shoppers. Coffee shops across the city are also booming as society becomes more outgoing.
Rwanda’s economy is experiencing rapid expansion, with GDP growing by 8.9% in 2024 to reach Frw 18,785 billion, according to the latest GDP National Accounts, 2024, released this Wednesday, March 19, 2025, by the National Institute of Statistics of Rwanda (NISR).
The report highlights strong consumer spending as the primary driver of this growth, with private consumption now making up 70% of the country’s GDP.
This means that economic activity is largely sustained by what people are spending on goods and services, rather than by investment or exports. While this trend has led to business expansion, job creation, and a thriving retail sector, it also raises concerns about the long-term sustainability of Rwanda’s economic model.
The question now is whether this surge in money circulation is a sign of prosperity or a warning of potential risks ahead.
Why Is There So Much Money in Circulation?
Rising Consumer Spending and Business Growth
The NISR report reveals that the wholesale and retail trade sector grew by 18% in 2024, showing that households and businesses are spending more than ever. From supermarkets to clothing stores, businesses have benefited from higher consumer demand, and this increased spending is fueling growth across multiple industries.
The hospitality sector also saw an 11% increase, with more people dining out, booking hotels, and spending on leisure activities. This growth aligns with Rwanda’s goal of becoming a regional tourism and business hub, attracting not only foreign visitors but also boosting domestic tourism.
Government Spending Boosts Liquidity
A significant contributor to the increase in money circulation has been government expenditure, which rose by 15% in 2024. The public sector has injected funds into infrastructure, social programs, and salaries, ensuring that more disposable income reaches households. This has led to higher spending in the economy, particularly in health services, which saw a 15% increase, and education services, which grew by 5%.
Digital Finance and Easy Access to Money
One of the standout trends in the latest GDP report is the 25% growth in Rwanda’s information and communication sector, driven by the expansion of mobile money, fintech, and e-commerce. More people are now transacting digitally, making payments easier and increasing the speed at which money moves through the economy.
With widespread adoption of mobile money platforms like MTN Mobile Money and Airtel Money, financial transactions are happening faster, making it easier for people to access and spend their money instantly. This has contributed to the high liquidity in the economy, as digital finance continues to enhance financial inclusion and consumer convenience.
Industrial and Manufacturing Growth
Another factor fueling spending is Rwanda’s growing manufacturing sector, which expanded by 7% in 2024. Key industries such as metal products, machinery, and equipment manufacturing grew by 20%, while non-metallic minerals and chemical production increased by 15%.
The textiles and clothing industry saw a 10% rise, likely due to Rwanda’s ban on second-hand clothing, which has pushed demand for locally produced garments. This industrial expansion means that more jobs are being created, and higher employment levels lead to more disposable income, further driving consumption.
Remittances and Foreign Aid Keep Money Flowing
Another major contributor to Rwanda’s liquidity is remittances from the diaspora, which continue to provide financial support to households.
Rwanda’s diaspora sent home $502 million in 2024, according to Central Bank figures released this week. Though down by $2m compared to 2023, the remittance is still exorbitantly high. To this into perspective, in the year 2014, remittances were just $128.2m.
Many Rwandans are sending a lot of money home, some of it for personal development like building homes or setting up business that they can eventually return to, as well as for family welfare, which boosts household incomes and allows for increased spending.
Downtown Kigali on normal weekday
Additionally, foreign aid and development funding have kept money circulating, particularly in sectors like education, healthcare, and infrastructure development. These financial inflows ensure that Rwanda’s economy remains well-funded, even as private sector investment catches up.
The Downsides of Too Much Money in Circulation
While a high-spending economy drives growth, there are risks associated with too much money in circulation without corresponding investment. One of the biggest concerns is that Rwanda still imports many of its consumer goods, meaning that a large portion of the money spent locally actually leaves the country.
Despite efforts to promote “Made in Rwanda” products, the demand for imported clothing, electronics, food, and fuel remains high. If this pattern continues, Rwanda could face a widening trade deficit, where it spends more on foreign goods than it earns from exports. This would put pressure on the Rwandan franc and increase the risk of inflation, making everyday goods more expensive.
Another challenge is low savings and investment levels. With so much money circulating and being spent on short-term consumption, there is a risk that not enough is being saved or invested in long-term economic growth.
If more capital were directed toward industrial expansion, infrastructure, and export-driven industries, Rwanda’s economy would become more self-sufficient and resilient to external shocks.
Balancing Growth and Sustainability
The latest GDP report paints a picture of a booming economy with rising incomes, high consumer confidence, and strong business growth. However, to ensure long-term stability, Rwanda must focus on strengthening its investment culture, reducing import dependency, and encouraging more domestic production.
By balancing high liquidity with strategic investments in manufacturing, technology, and export industries, Rwanda can ensure that today’s high-spending economy transforms into a sustainable and self-reliant economic powerhouse for the future.
Another notable aspect from the Statistics Institute’s latest data is that despite overall GDP growth, GDP per capita dropped from $1,054 in 2023 to $1,029 in 2024.
This suggests population growth outpacing GDP growth, and there is also currency depreciation effects, as the U.S. dollar gains more due to international factors.
