Effect of Foreign Direct Investment on Economic Growth in Rwanda

Authors

  • Jean Claude Maniraguha University of Kigali, Kigali, Rwanda
  • Dr. Claude RUSIBANA University of Kigali, Kigali, Rwanda

DOI:

https://doi.org/10.53819/81018102t2277

Abstract

The research study aimed to examine the effects of foreign direct investment (FDI) on the economic growth of Rwanda, with a specific focus on Rwanda. The study sought to explore the relationship between FDI and key economic indicators such as the inflation rate, exchange rate fluctuations, and balance of trade, to gain insights into the overall impact of FDI on Rwanda's economic development. The research adopted a mixed-methods approach, combining quantitative and qualitative data collection and analysis. Data were collected through questionnaires and documentary research. Documentary research involved analyzing archival data from the BNR to obtain historical information and supporting evidence on FDI and its impact on economic growth in Rwanda. Quantitative data were analyzed using python 3, employing statistical techniques, including descriptive statistics, correlation analysis, and regression analysis. These analyses explored the relationships between FDI and economic growth indicators, such as the inflation rate, exchange rate fluctuations, and balance of trade. Qualitative data obtained from documentary research were thematically analyzed to gain a deeper understanding of the stakeholders' perspectives on the consequences of FDI in Rwanda. The research findings confirm that Rwanda Both inflation and economic growth rates in Rwanda have shown upward trends. Inflation started relatively low at 2.3% in 2017-2018 and gradually increased to 4.6% in 2021-2022. Economic growth also began at 3.4% in 2017-2018 and rose to 4.6% during the same period. Rwanda has demonstrated a noteworthy relationship between exchange rate stability and economic growth. The exchange rates remained consistently stable, fluctuating between 4.3% and 4.6%, indicating a favorable environment for international trade and investments. Simultaneously, Rwanda's economic growth rates steadily climbed from 3.4% to 4.6%, reflecting effective economic policies and investments. Rwanda's economic landscape is characterized by a consistent trade deficit in its Balance of Trade (BOT), ranging from -US$1,144.30 million to -US$2,000.40 million. Simultaneously, Rwanda experienced steady economic growth, with growth rates climbing from 3.4% to 4.6%. The research recommends to ensure economic stability in Rwanda, it is crucial to maintain inflation control through prudent fiscal and monetary policies. Additionally, diversifying the export portfolio, especially in agriculture and manufacturing, can reduce the trade deficit. Investment in export infrastructure, such as transportation and logistics, will boost competitiveness globally. Promoting both domestic and foreign investment, particularly in export-oriented sectors, will stimulate economic growth, create jobs, and address the trade deficit issue.

Keywords: Foreign Direct Investment, Economic Growth, Rwanda

Author Biographies

Jean Claude Maniraguha, University of Kigali, Kigali, Rwanda

Master of Business Administration in Accounting and Finance, University of Kigali, Rwanda

Dr. Claude RUSIBANA, University of Kigali, Kigali, Rwanda

Senior Lecturer, University of Kigali, Rwanda

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Published

2023-11-27

How to Cite

Maniraguha, J. C., & RUSIBANA, C. (2023). Effect of Foreign Direct Investment on Economic Growth in Rwanda. Journal of Finance and Accounting, 7(11), 118–138. https://doi.org/10.53819/81018102t2277

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Articles