UNIVA of KigaliSchool of business

INTRODUCTION TO MICRO-
ECONOMICS
. ASSINIMENT, 16th NOV 2024
SUBMITTED BY: GROUP 1
GROUP MEMBERS:
REG NUMBER NAMES SIGNATURE

1. 2401000491 NDAYAMBAJE ANANIAS

2. 2401001866 UZAMUKUNDA PASCALINE

3. 2401000165 MUGABE ALEX

4. 2205000414 SENGWA KAYIRANGA LIONEL

2401001624
5. MUTUYIMANA JEAN MARIE
.VIANNEY2401000
6. 2401000808 IRADUKUNDA CHRISTELLA

7. 2401001003 NIYONZIZA ANITHA

8. 2401000887 NIYIBIZI BLAISE

9. 2401000944 UMUTESI SANDRINE

10. 2401000693 ISHIMWE CEDRICK

11 2401000184 IKIREZI BELYSE

12 2305000022 ODRIE NASA

13 2401000506 DELPHINA
NYIRANSENGIMANA
14 2401001587 IRADUKUNDA LILIANE

15 2401001732 MUKUNDE JEANNINE

 INTRODUCTION

Unemployment is a term referring to individuals who are employable and actively seeking a job but
are unable to find a job. Included in this group are those people in the workforce who are
working but do The term “unemployment” is often misunderstood, it as it includes people who
are waiting to return to a job after being discharged, yet it does not include individuals who
have stopped looking for work in the past four weeks due to various reasons such as leaving
work to pursue higher education, retirement, disability, and personal issues. Also people who
are not actively seeking a job but do want to work are not classified as unemployed.

Interestingly, people who have not looked for a job in the past four weeks but have been
actively seeking one in the last 12 months are put into a category called the “marginally
attached to the labor force.” Within this category is another category called “discouraged
workers,” which refers to people who have given up looking for a job.

The categories mentioned above sometimes cause confusion and debate as to whether the
unemployment rate fully represents the actual number of people who are unemployed. For a
full understanding, one should juxtapose “unemployment” with the term “employment,” which
the Bureau of Labor Statistics (BLS) describes as individuals aged 16 and above who have
recently put hours into work in the past week, paid or otherwise, because of self-employment.

ot have an appropriate job

Types of Unemployment
1. Demand deficient unemployment

Demand deficit unemployment is the biggest cause of unemployment that typically happens
during a recession. When companies experience a reduction in the demand for their products
or services, they respond by cutting back on their production, making it necessary to reduce
their workforce within the organization. In effect, workers are laid off.

2. Frictional unemployment

Frictional unemployment refers to those workers who are in between jobs. An example is a
worker who recently quit or was fired and is looking for a job in an economy that is not
experiencing a recession. It is not an unhealthy thing because it is usually caused by workers
trying to find a job that is most suitable for their skills.

3. Structural unemployment

Structural unemployment happens when the skills set of a worker does not match the skills
demanded by the jobs available, or alternatively when workers are available but are unable to
reach the geographical location of the jobs.
An example is a teaching job that requires relocation to China, but the worker cannot secure a
work visa due to certain visa restrictions. It can also happen when there is a technological
change in the organization, such as workflow automation that displaces the need for human
labor.

Causes of Unemployment

1. Economic Factors:

 Economic Recession: During periods of economic downturn, businesses may cut back on
production or close down entirely, leading to job losses.
 Inflation: When inflation is high, the purchasing power of consumers drops, which can reduce
demand for goods and services. As a result, companies may reduce their workforce.
 Technological Changes: Automation and technological advancements can replace certain
jobs, leading to structural unemployment. For example, robots may replace factory workers, or
software may replace administrative staff.
 Globalization: The global economy can lead to outsourcing, where companies move jobs to
countries with lower labor costs, resulting in job losses in the home country.
 Recession and Cyclical Unemployment: During a recession, companies struggle with
reduced demand, leading to layoffs and job freezes. The demand for labor usually picks up
again when the economy recovers.

2. Structural Factors:

 Mismatch of Skills: Sometimes, workers' skills do not match the current needs of the labor
market. For example, workers in industries that decline (like coal mining) may not have skills
needed for growing sectors (like technology).
 Geographical Mismatch: Jobs may be available in some regions, but workers may not be able
to move to those areas due to personal, financial, or family constraints.
 Industry Decline: Certain industries may decline over time due to changes in consumer
demand, technology, or regulations. For instance, the rise of digital media has hurt traditional
print journalism, leading to job losses in that sector.

3. Political and Policy Factors:

 Government Policies: Tax policies, labor laws, and regulations can either promote or hinder
job creation. For example, excessive taxation on businesses can discourage them from hiring
new workers.
 Minimum Wage Laws: While minimum wage laws are important for ensuring fair compensation,
they can sometimes lead to job losses if businesses cannot afford to hire workers at the
mandated wage levels.
 Unemployment Benefits: Generous unemployment benefits can sometimes reduce the
incentive for job seekers to actively look for work, which can contribute to higher unemployment.

4. Social and Demographic Factors:

 Population Growth: In some areas, rapid population growth may lead to an excess supply of
labor, especially if the economy is not growing fast enough to absorb the growing workforce.
 Youth Unemployment: Young people often face higher unemployment rates because they lack
experience or skills. In some countries, youth unemployment is a major challenge.
 Education and Training: Low levels of education or lack of relevant vocational training can lead
to higher unemployment, particularly in highly specialized fields where advanced qualifications
are required.
 5. Seasonal Unemployment:

 Some industries, such as agriculture, tourism, and retail, experience seasonal demand. In such
sectors, workers may be employed only during peak seasons, and unemployment occurs during
the off-season.

6. Frictional Unemployment:

 Job Search Time: This type of unemployment occurs when people are between jobs or are
temporarily out of work while looking for a new job. It is a natural part of the labor market and is
usually short-term.

7. Health and Disability:

 Physical or mental health problems can prevent people from working or lead to long-term
unemployment if the person is unable to perform their job functions. Chronic illness and disability
can create long-lasting employment challenges.

In summary, the causes of unemployment are multi-dimensional and often interrelated. Addressing the
issue requires a combination of policies, such as improving education and training, fostering economic
growth, and creating job opportunities through infrastructure investment or supporting emerging
industries.
Solutions to Remove Causes of Unemployment

Economic Growth and Job Creation

 Stimulate Economic Growth: A growing economy leads to more business opportunities,

investments, and ultimately more jobs. Governments can invest in infrastructure projects,
support local businesses, and promote sectors with high employment potential (e.g., green
energy, technology, and healthcare).
 Encourage Entrepreneurship: Support small businesses and start-ups by providing incentives
such as tax breaks, grants, and low-interest loans. Small businesses are key drivers of job
creation and innovation.
 Diversification of the Economy: Economies that rely heavily on one sector (e.g., oil, mining,
agriculture) are more vulnerable to market fluctuations. Encouraging diversification into
industries like technology, tourism, and renewable energy can lead to new employment
opportunities.

2. Education and Skills Development

 Invest in Education: Education is crucial for providing individuals with the skills necessary to
thrive in the job market. Governments should invest in quality education from primary through to
higher education.
 Vocational and Technical Training: Promote vocational training and apprenticeships to equip
young people and adults with practical skills that are in demand in the labor market. This can
bridge the gap between academic education and the needs of the workforce.
 Reskilling and Upskilling: As industries evolve due to technological change, workers may
need to learn new skills. Governments, businesses, and educational institutions can collaborate
to offer programs for reskilling workers, especially those affected by automation or industry
decline.

3. Labor Market Reforms

 Labor Flexibility: Reforms that make the labor market more flexible, such as easing hiring and
firing practices or adapting wage laws, can encourage businesses to hire more workers. This
includes removing bureaucratic barriers that make it difficult for companies to expand or hire
new employees.
 Encourage Part-Time and Remote Work: Policies that support flexible working arrangements
can help reduce unemployment. Offering more part-time or remote work opportunities can help
people find jobs that fit their circumstances, especially for caregivers or those with other
commitments.
 Unemployment Benefits Reform: While unemployment benefits provide a safety net, ensuring
they are balanced with active labor market policies (such as job training or work placements)
can help encourage job seekers to return to work more quickly.

4. Government Programs and Public Sector Jobs

 Public Employment Schemes: Governments can create public sector job opportunities,
especially in times of high unemployment. Programs like infrastructure development, public
health initiatives, and environmental conservation can absorb a significant number of workers.
 Job Matching Services: Establish job placement and job matching services that connect job
seekers with employers. This can help reduce frictional unemployment and ensure that
individuals find jobs that align with their skills.

5. Support for Specific Groups

  Youth Employment Programs: Since young people often face higher unemployment rates due
to lack of experience, targeted programs such as internships, apprenticeships, and mentorship
opportunities can help them transition into the workforce.
 Support for Women and Minorities: Programs that encourage gender equality and support
minority groups in accessing job opportunities can help reduce unemployment disparities. This
includes initiatives that address barriers like discrimination, work-life balance, and access to
education.
 Support for Disabled Workers: Ensuring that people with disabilities can access the labor
market requires providing adequate accommodations, training, and job placement services.

6. Encourage Innovation and Technology Adoption

 Promote Technological Innovation: Technological advancement, while sometimes displacing

jobs, can also create new ones. Encouraging innovation in fields such as renewable energy,
digital services, and health care can create new industries and job opportunities.
 Support Digital Transformation: As the world becomes more digital, encouraging digital
literacy and online job opportunities can be key. Governments and businesses can invest in e-
commerce, digital marketing, and other online fields that offer significant potential for job
creation.

7. Entrepreneurship and Small Business Development

 Entrepreneurship Support Programs: Providing start-up capital, tax breaks, and mentorship
can encourage entrepreneurship. In many cases, small businesses are the biggest employers in
a local economy, so fostering entrepreneurship can reduce unemployment.
 Access to Finance: Improving access to finance for small businesses, particularly in emerging
markets or post-crisis economies, is essential. This can be done through microloans, grants, and
venture capital programs.

8. Addressing Structural Unemployment

 Regional Development Programs: For areas facing regional unemployment due to industry
decline or migration patterns, the government can promote economic development programs
that focus on local needs. This might include creating special economic zones, improving
infrastructure, and attracting new industries to depressed areas.
 Job Relocation Assistance: Workers in declining industries or regions can be given financial
assistance or retraining opportunities to relocate to areas with higher demand for labor.

9. Incentivize Private Sector Job Creation

 Tax Incentives for Employers: Tax breaks or subsidies for companies that hire unemployed
individuals can encourage businesses to increase hiring, especially in times of economic
downturn.
 Public-Private Partnerships: Collaboration between governments and the private sector can
help stimulate job creation, particularly in infrastructure, technology, and research sectors.

10. Social Safety Nets and Welfare Support

 Universal Basic Income (UBI): Some argue that providing a guaranteed income to everyone
could reduce unemployment, especially as automation and AI change the labor landscape.
While controversial, UBI could provide financial security while people retrain or explore new job
opportunities.
 Social Services: Strengthening social services that help individuals transition back into the
workforce, such as career counseling, job training, and mental health support, can make it
easier for people to find sustainable employment.
 In Summary:

Reducing unemployment requires a combination of short-term solutions (like job creation programs) and
long-term strategies (like education reform and economic diversification). The key is to focus on
fostering a dynamic, flexible, and inclusive labor market that adapts to changing economic conditions
and technological advancements.

Inflation refers to the rate at which the general level of prices for goods and services rises, leading to a
decrease in the purchasing power of money. In other words, inflation means that, over time, money buys
less than it did before. It is measured as an annual percentage change in the Consumer Price Index (CPI)
or other price indices.

Causes of Inflation

There are several factors that can lead to inflation, often categorized into demand-pull inflation, cost-
push inflation, and built-in inflation:

1. Demand-Pull Inflation:

 Increased Consumer Demand: When the demand for goods and services exceeds their supply,
businesses may raise prices to balance supply and demand. This can happen when:
o The economy is growing rapidly.
o There is an increase in consumer spending due to tax cuts, low-interest rates, or
government stimulus.
o There's a surge in demand for a particular product or service (e.g., during a holiday
season or a housing boom).
 Example: In a booming economy, people may have more disposable income and want to buy
more goods. If supply can't keep up, prices rise, leading to inflation.

2. Cost-Push Inflation:

 Rising Production Costs: If the costs of raw materials or labor increase, producers may raise
prices to maintain their profit margins. Common causes include:
o Increased wages: When wages rise (e.g., due to stronger labor unions or minimum
wage laws), businesses may pass on the higher labor costs to consumers through higher
prices.
o Higher Raw Material Costs: An increase in the cost of essential raw materials (like oil,
steel, or agricultural products) can lead to higher production costs, which are often
passed on to consumers.
 Example: An increase in oil prices can lead to higher transportation and production costs for a
wide range of goods, which causes the prices of those goods to rise.

3. Built-In Inflation (Wage-Price Spiral):

 Expectations of Inflation: When workers and businesses expect inflation to continue, they often
act in ways that contribute to inflation. Workers demand higher wages to keep up with rising
living costs, and businesses raise prices to cover higher wage costs, leading to a cycle of wage
and price increases.
 This can lead to a self-fulfilling cycle where inflation continues to spiral upward as businesses
and workers adjust their expectations.
 Example: If employees expect inflation to rise, they may demand higher wages, and employers
may increase prices to pay for those higher wages, which in turn leads to further wage demands.
4. Monetary Policy and Central Banks:

 Excessive Money Supply: One of the primary causes of inflation can be an increase in the
money supply. If a country’s central bank prints more money or lowers interest rates too much,
too much money can flood the economy, causing inflation. This is known as monetary inflation.
o Central banks often use interest rates to control inflation: Lowering interest rates
encourages borrowing and spending, which can lead to higher demand and inflation,
while raising interest rates can reduce borrowing and control inflation.
 Example: If the central bank injects a lot of money into the economy, people have more money
to spend, but if the supply of goods doesn’t increase correspondingly, inflation will rise.

5. External Factors:

 Imported Inflation: Inflation can also be imported from abroad, particularly when a country
relies heavily on imported goods. If the prices of these goods rise (due to global price increases,
like oil or food), it can lead to domestic inflation.
o Exchange rate fluctuations can also affect inflation. If a country’s currency depreciates,
imports become more expensive, which can lead to higher prices domestically.
 Example: If the price of oil rises globally, countries that rely on oil imports will see higher prices
for gasoline, transportation, and many goods, causing overall inflation.

Effects of Inflation
1. Decreased Purchasing Power:

 Inflation erodes the value of money. As prices rise, the purchasing power of consumers
decreases, meaning they can buy less with the same amount of money. This can impact
households, especially those on fixed incomes (e.g., retirees).

2. Income Distribution:

 Inflation can benefit borrowers (because the value of their debt decreases over time) but hurt
savers (since the real value of their savings is reduced).
 People with fixed salaries may struggle to keep up with inflation, while those whose wages or
investments grow with inflation (e.g., some business owners or stockholders) might benefit.

3. Uncertainty and Economic Growth:

 High or unpredictable inflation creates uncertainty in the economy, making it harder for
businesses to plan for the future. Investment may decrease as businesses are less sure about
future costs, which can slow down economic growth.
 Consumers may cut back on spending if they believe prices will continue to rise, which can
further reduce economic activity.

4. Interest Rates:

 Inflation is closely tied to interest rates. If inflation rises, central banks may increase interest
rates to try to bring it down, which can make borrowing more expensive and slow down
consumer and business spending.
 High interest rates can also impact the housing market, car sales, and other major consumer
expenditures.

5. Redistribution of Wealth:

 Inflation can redistribute wealth between different groups in society. For example, those who
own assets (real estate, stocks, etc.) may see the value of their assets increase, while those
who rely on cash savings may see their wealth erode.
 Controlling Inflation

To manage inflation and maintain price stability, central banks and governments use several tools:

1. Monetary Policy:

 Central banks, like the Federal Reserve in the U.S., use interest rates and the money supply to
control inflation:
o Raising Interest Rates: Central banks may increase interest rates to reduce borrowing
and spending in the economy, helping to slow inflation.
o Open Market Operations: Central banks can buy or sell government bonds to control
the money supply, reducing inflationary pressures.

2. Fiscal Policy:

 Governments can influence inflation through fiscal policies, such as adjusting taxes and public
spending. By reducing spending or increasing taxes, the government can reduce demand in the
economy, which can help reduce inflation.

3. Supply-Side Policies:

 Increasing the supply of goods and services can help lower inflation. Governments can invest in
infrastructure, technology, and education to increase productivity and supply capacity, which can
prevent prices from rising too quickly.

4. Wage and Price Controls:

 In some cases, governments may impose wage and price controls to try to directly limit
inflation. However, such measures often lead to shortages, black markets, and other distortions
in the economy, so they are generally considered a last resort.

Conclusion

Inflation is a natural part of economic life, but when it is too high or unpredictable, it can have negative
effects on the economy, businesses, and individuals. Central banks and governments play a crucial role
in managing inflation through monetary and fiscal policies. Maintaining low and stable inflation is
important for preserving the purchasing power of money, ensuring economic growth, and promoting
overall stability in the economy.

In Rwanda, as in many countries, both unemployment and inflation are influenced by a variety of
economic, social, and political factors. However, the causes of these issues in Rwanda have specific
nuances shaped by the country’s unique development trajectory, its post-genocide recovery, and its
efforts to modernize the economy. Let’s break down the causes of both unemployment and inflation in
Rwanda:

Causes of Unemployment in Rwanda

1. Demographic Pressures (High Population Growth)

 Young Population: Rwanda has a very young population, with a large proportion of people
under the age of 25. Every year, thousands of young people graduate from schools and
universities, creating pressure on the job market. However, the economy may not be growing
fast enough to absorb all these new entrants into the workforce.
  Population Growth: Rwanda’s population is growing rapidly, with over 12 million people as of
2024. The growing population leads to an increase in the number of job seekers, particularly in
rural areas, where opportunities are limited.

2. Skills Mismatch

 Education and Labor Market Mismatch: There is a gap between the skills that young people
acquire in the education system and those demanded by the labor market. Many graduates lack
the practical, vocational, or technical skills needed by businesses, especially in rapidly
developing sectors like ICT, construction, and manufacturing.
 Inadequate Technical Training: Although Rwanda has made strides in improving its
educational system, there is still a significant need for technical and vocational education and
training (TVET) to equip the workforce with skills for the growing sectors.

3. Limited Industrialization and Private Sector Growth

 Dependence on Agriculture: A significant portion of the Rwandan workforce is employed in

agriculture, which is often seasonal and vulnerable to climate changes. While the government is
working to modernize agriculture, many people remain in low-paying, subsistence farming jobs.
 Underdeveloped Private Sector: Despite efforts to boost the private sector, especially through
initiatives like the Vision 2020 and National Strategy for Transformation (NST1), Rwanda's
private sector is still relatively small and not able to absorb the large number of new workers
entering the labor market.
 Entrepreneurship Challenges: While the government has been promoting entrepreneurship,
many aspiring entrepreneurs face challenges such as limited access to finance, high costs of
doing business, and a lack of mentorship and networks, which makes it difficult for small
businesses to thrive and create jobs.

4. Rural-Urban Migration

 Urbanization and Job Concentration in Kigali: Many Rwandans, particularly from rural areas,
migrate to Kigali (the capital city) in search of better job opportunities. However, the number of
available jobs in Kigali is insufficient to accommodate all these migrants, leading to urban
unemployment and informal employment (e.g., street vendors, casual labor).
 Limited Employment in Rural Areas: While agriculture is the mainstay of the rural economy,
the lack of sufficient modern farming techniques, infrastructure, and industries in these areas
means that many people remain unemployed or underemployed.

5. Youth Unemployment

 High Youth Unemployment: Unemployment is particularly high among young people in

Rwanda. While the government has implemented various programs, such as youth
entrepreneurship initiatives and skills development programs, many young people still
struggle to find formal, full-time jobs. This issue is exacerbated by an education system that
often emphasizes academic qualifications over vocational or practical training.

Causes of Inflation in Rwanda

1. External Factors (Imported Inflation)

 Global Commodity Prices: Rwanda relies heavily on imported goods, including fuel, food, and
construction materials. Fluctuations in global commodity prices, especially for oil and food
products, can lead to imported inflation. For instance, an increase in global oil prices will lead to
higher transportation and energy costs, which in turn affects the price of goods and services
across the economy.
  Currency Depreciation: The value of the Rwandan franc (RWF) against major currencies like
the US dollar or the euro can affect inflation. A weakening of the currency makes imports more
expensive, leading to higher prices for imported goods.

2. Demand-Pull Inflation

 Rapid Economic Growth: Rwanda’s economy has been growing steadily over the past decade,
with significant investments in infrastructure, tourism, and services. However, as demand for
goods and services increases, supply may not always keep up, leading to higher prices. For
example, as the middle class grows and demand for consumer goods increases, businesses
may raise prices to meet demand, causing inflation.
 Government Spending: Large-scale government projects, such as the construction of roads,
buildings, and other infrastructure, can drive up demand in the economy. If the economy is
unable to produce enough goods to meet this demand, inflation can result.

3. Cost-Push Inflation

 Rising Production Costs: Increases in the cost of production, such as higher labor costs or
increased prices for raw materials, can lead to inflation. If businesses face higher costs, they
often pass these costs onto consumers in the form of higher prices.
 Agricultural Vulnerabilities: Rwanda's reliance on agriculture means that inflation can be
affected by changes in crop yields. Poor harvests due to adverse weather conditions (e.g.,
drought or floods) can reduce the supply of food and agricultural products, leading to higher food
prices.

4. Monetary Policy and Excessive Money Supply

 Money Supply Growth: The Central Bank of Rwanda (BNR) manages inflation using monetary
policy tools, including interest rates and the money supply. If the money supply grows too
quickly (e.g., through excessive borrowing or government spending), it can lead to inflation, as
more money chases the same number of goods and services.
 Interest Rates: Although the Central Bank of Rwanda tries to control inflation by managing
interest rates, excessive borrowing or underinvestment in the productive sectors can push
inflation up.

5. Wage-Price Spiral

 Labor Market Pressures: As inflation increases, workers often demand higher wages to
maintain their standard of living. If businesses grant these wage increases, they may raise
prices to cover the higher costs, leading to a cycle of inflation. This wage-price spiral is a
common feature in economies with high inflation.

6. External Shocks (Geopolitical and Climate Issues)

 Geopolitical Instability: Regional conflicts, trade disruptions, or natural disasters can cause
supply chain problems and lead to inflation. For example, disruptions in trade routes or conflicts
in neighboring countries can increase transportation costs and decrease the availability of goods
in Rwanda, pushing up prices.
 Climate Change and Agriculture: Rwanda's heavy reliance on agriculture makes it vulnerable
to the effects of climate change. Droughts, floods, or other extreme weather conditions can
disrupt food production, leading to food shortages and higher prices.

Conclusion

In Rwanda, both unemployment and inflation are influenced by a range of internal and external factors.
Unemployment is driven by issues such as high population growth, skills mismatch, reliance on
agriculture, and insufficient industrialization. Meanwhile, inflation in Rwanda is largely influenced by
external factors (such as global commodity prices), demand-pull and cost-push pressures, and monetary
policy challenges.

To address these issues, Rwanda's government is focused on economic diversification, job creation in
key sectors like technology and manufacturing, and skills development to reduce unemployment. For
inflation, the government and central bank are working to stabilize the economy through monetary
controls, diversifying imports, and promoting sustainable local production. However, external
shocks, such as fluctuating global commodity prices and climate change, remain significant challenges
for managing both inflation and unemployment in the country.

Rwanda has taken a proactive approach to addressing the challenges of unemployment and inflation,
focusing on long-term, sustainable economic growth, infrastructure development, skills training, and
sound monetary policies. Below are some of the key strategies and initiatives Rwanda has implemented
to combat these issues:

1. Addressing Unemployment in Rwanda

A. Promoting Economic Diversification and Industrialization

 Manufacturing and Industry Development: Rwanda has been making significant efforts to
diversify its economy, which has traditionally been dependent on agriculture. The government
has introduced policies to support industrialization, such as the National Industrial Policy,
which aims to increase the contribution of manufacturing to GDP and create more job
opportunities in this sector.
 Export Growth: Through the Made in Rwanda initiative, the government is encouraging local
production of goods that were previously imported. This includes textiles, clothing, and food
processing, which helps create jobs and reduces reliance on imports. Rwanda is also working
on improving its export sectors like mining, tourism, and agriculture.
 Promotion of Special Economic Zones (SEZs): The government has established Special
Economic Zones (SEZs) to attract both foreign and local investments in manufacturing and
services. These zones offer tax incentives, infrastructure support, and easier business
processes to stimulate industrial development and create employment opportunities.
 ICT and Technology: Rwanda is positioning itself as a regional hub for information and
communication technology (ICT). The Kigali Innovation City and the Smart Rwanda Master
Plan are initiatives aimed at transforming Rwanda into a knowledge-based economy. By
encouraging the growth of tech start-ups and digital businesses, Rwanda hopes to create more
tech-related jobs, especially for the youth.

B. Youth Employment and Entrepreneurship

 National Employment Program (NEP): The Rwandan government introduced the National
Employment Program to address the high levels of youth unemployment. The program focuses
on equipping young people with skills and facilitating their integration into the labor market,
particularly in sectors like agriculture, construction, and technology.
 Youth Entrepreneurship and Innovation: The government is encouraging youth
entrepreneurship through various programs such as Agaciro Development Fund,
YouthConnekt, and the National Youth Empowerment Fund. These initiatives provide
financial support, mentoring, and networking opportunities to help young people start their own
businesses and create jobs.
 Vocational and Technical Education and Training (TVET): Recognizing the skills mismatch,
the government is investing in vocational training centers to provide practical skills to youth.
Programs in construction, mechanics, agriculture, and hospitality are being emphasized to
ensure that young people have the skills needed by industries that are growing in Rwanda.
 Apprenticeships and Internships: To increase employability, the government is encouraging
private sector participation in providing internships and apprenticeships for young people. This
offers them practical work experience, making them more competitive in the job market.
C. Rural Development and Agriculture Modernization

 Agricultural Transformation: Since a large portion of the population is still employed in

agriculture, Rwanda has been working on improving agricultural productivity through the Crop
Intensification Program (CIP) and other agricultural policies. These programs provide farmers
with modern inputs like fertilizers, seeds, and access to irrigation, which can increase yields and
income, as well as reduce seasonal unemployment.
 Promotion of Agro-processing: To add value to agricultural products and create jobs, Rwanda
is investing in agro-processing industries. This includes the processing of food products, dairy,
and horticultural products. The goal is to move away from subsistence farming toward more
commercial and value-added agriculture.

2. Addressing Inflation in Rwanda

A. Monetary Policy and Inflation Control

 Central Bank Actions: The National Bank of Rwanda (BNR) plays a critical role in controlling
inflation by using monetary policy tools, such as adjusting interest rates, regulating money
supply, and using foreign exchange reserves to stabilize the currency. When inflation starts to
rise, the BNR may increase interest rates to discourage borrowing and reduce demand, helping
to control inflation.
 Exchange Rate Management: Since Rwanda imports many goods, particularly oil and food,
fluctuations in the exchange rate can drive up inflation. The central bank is managing exchange
rate policy to stabilize the Rwandan franc (RWF) against major currencies and reduce the cost
of imports. Rwanda’s focus on developing its foreign exchange reserves helps to shield the
economy from external shocks.
 Price Stabilization Policies: The government has also been involved in measures to reduce
price volatility, especially for essential goods like food and fuel. For example, it sometimes sets
price ceilings for basic commodities to ensure that inflation does not disproportionately affect
vulnerable populations.

B. Infrastructure Development to Reduce Costs

 Energy and Transport Infrastructure: Infrastructure development, particularly in energy and

transport, is a key priority for reducing costs in Rwanda. By investing in energy generation
(hydroelectric, solar, and geothermal), the government aims to reduce energy costs for
businesses and households, helping to keep inflation in check.
 Road and Transport Networks: The government is also improving the country’s road
infrastructure to lower transportation costs. By reducing the cost of moving goods from rural
areas to urban centers, the government aims to reduce food prices and other consumer goods,
which can help combat inflation.

C. Enhancing Local Production

 Substitute Imports with Local Production: To reduce dependency on imports, the

government has put policies in place to boost local production of goods, especially food,
construction materials, and manufactured goods. The Made in Rwanda initiative encourages
businesses to produce locally, which can help reduce inflationary pressures caused by rising
import prices.
 Agricultural Development: As mentioned earlier, improving the agricultural sector through
programs like the Crop Intensification Program and investing in agro-processing reduces the
need for imports, particularly food. By boosting domestic food production, the government aims
to curb food inflation, which is a major driver of overall inflation in Rwanda.

D. Climate-Resilient Agriculture
  Climate Change Mitigation and Adaptation: Climate change has the potential to drive up food
prices by affecting agricultural yields. To address this, Rwanda has been investing in climate-
resilient agriculture by promoting practices such as conservation farming, irrigation
systems, and the use of drought-resistant crops. These measures can help stabilize food
prices in the long term.
 Weather Insurance: The government is also exploring the use of weather-based insurance
schemes for farmers. This helps protect them from the impact of climate shocks like droughts or
floods, stabilizing food supply and prices.

E. Fiscal Measures

 Tax and Subsidy Policies: The Rwandan government has used tax policies to regulate
inflation. For example, import taxes can be adjusted to control the flow of goods that might
contribute to inflation. Additionally, subsidies for essential items like fuel or food are sometimes
used to stabilize prices during periods of high inflation.
 Public Debt Management: Rwanda has maintained a relatively low level of public debt, which
helps avoid excessive borrowing. Managing public debt effectively helps prevent inflationary
pressures that could arise from high borrowing costs or a potential debt crisis.

3. Long-Term Strategies for Combating Unemployment and Inflation

 Economic Transformation Agenda (NST1): Under the National Strategy for Transformation
(NST1), Rwanda aims to become a middle-income economy by 2035. This comprehensive
strategy focuses on fostering innovation, improving human capital, promoting private sector
development, and ensuring inclusive economic growth. Key sectors, such as tourism, ICT,
infrastructure, and agriculture, are prioritized to drive sustainable job creation.
 Private Sector Development: Rwanda continues to improve the business environment by
reducing red tape, enhancing access to finance, and ensuring a stable macroeconomic
environment. Programs like Rwanda Development Board (RDB) provide a one-stop-shop for
investors, promoting foreign direct investment (FDI) and encouraging local business growth,
which is essential for job creation.

Conclusion

Rwanda’s efforts to address unemployment and inflation are multi-faceted and focus on economic
diversification, youth employment, infrastructure development, and prudent monetary policy. The
government has focused on transforming agriculture, improving skills, encouraging entrepreneurship,
and modernizing its economy through technology and industrialization. By addressing structural factors
such as skills mismatches, fostering the growth of key sectors, and promoting sustainable economic
policies, Rwanda is making strides toward reducing unemployment and controlling inflation in the long
term.

However, challenges remain, such as the vulnerability to external shocks (like global commodity price
fluctuations) and the need for more job opportunities for a growing population. Continued investment in
infrastructure, human capital, and the private sector will be crucial for achieving long-term economic
stability and reducing poverty and unemployment.