FOREIGN CAPITAL INFLOWS AND ECONOMIC GROWTH IN RWANDA: A TREND ANALYSIS

Abstract

Foreign Direct Investment (FDI) plays a critical role in influencing economic growth, especially in developing countries like Rwanda. Over the past two decades, Rwanda has positioned itself as an attractive destination for FDI by implementing policies aimed at improving the investment climate and promoting private sector-led growth. Notably, the government's adoption of a new industrial policy in 2008 and its ambitious Vision 2020 strategy—aimed at transforming Rwanda into a knowledge-based, middle-income country—highlight the nation's commitment to leveraging FDI as a catalyst for development. This study explores the trends in FDI inflows to Rwanda and evaluates their impact on the country's economic performance. Drawing on empirical insights and secondary data, the paper reviews the relationship between FDI and GDP growth, employment, and sectoral development. The findings support previous research (e.g., Adams, 2009) indicating a positive correlation between FDI and economic growth. The analysis also sheds light on the policy implications and strategic areas that continue to attract foreign investors, particularly in sectors such as manufacturing, services, and infrastructure. Ultimately, the study underscores the importance of sustained economic reforms, institutional stability, and investor-friendly policies in maximizing the benefits of FDI for Rwanda’s long-term development goals.