Economic Causes Notes

Economic Causes

1. Population pressure
   1. Rwanda was one of the world’s smallest and most densely populated countries, with around 5 million people by 1978.
   2. The population density was about 800 inhabitants per square kilometre of arable land.
   3. This caused intense pressure on limited fertile farmland.
2. Dependence on coffee
   1. Rwanda’s economy heavily depended on coffee, which made up about 75% of exports.
   2. Unsustainable farming practices, lack of crop diversity, and declining yields made Rwanda vulnerable to global coffee price fluctuations, especially after prices collapsed in 1989.
3. Global coffee crisis (1989)
   1. The collapse in prices was mainly due to oversupply in the international market, especially from Brazil and Vietnam.
   2. It was worsened by falling demand in developed countries.
   3. This global glut caused a sharp decline in coffee prices, severely affecting countries reliant on exports, including Rwanda.
4. Impact on Rwanda’s income
   1. Since coffee accounted for 75% of export earnings, the price collapse drastically reduced foreign exchange revenues.
   2. This caused a significant drop in national income.
5. Weakening of government capacity
   1. The loss of revenue weakened Rwanda’s balance of payments and limited the government’s ability to fund imports and development programs.
   2. With reduced earnings, GDP growth slowed, worsening poverty and unemployment, especially among rural farmers reliant on coffee.
6. Social and political effects
   1. The economic shock increased competition for dwindling resources, particularly fertile land.
   2. It exposed Rwanda’s vulnerability from over-reliance on a single export and lack of diversification.