Rwanda’s Aid Policy Implementing Change to Maximise the Impact of Aid on Poverty Reduction and Economic Growth John Rwangombwa Secretary General and Secretary.

Rwanda’s Aid Rwanda’s Aid PolicyPolicyImplementing Change to Maximise the Implementing Change to Maximise the Impact of Aid on Poverty Reduction Impact of Aid on Poverty Reduction and Economic Growthand Economic Growth

John RwangombwaJohn RwangombwaSecretary General and Secretary to the Secretary General and Secretary to the TreasuryTreasuryMinistry of Finance and Economic Ministry of Finance and Economic PlanningPlanning

Presentation OutlinePresentation Outline Aid to Rwanda in figuresAid to Rwanda in figures Background to Aid Effectiveness Background to Aid Effectiveness

initiatives at the national and initiatives at the national and international levelinternational level

Process of developing Aid PolicyProcess of developing Aid Policy Overview of Aid Policy contentOverview of Aid Policy content Focus on Implementation: Who, Focus on Implementation: Who,

What and HowWhat and How The need to scale up aid to The need to scale up aid to

RwandaRwanda

Aid to Rwanda in Aid to Rwanda in FiguresFigures GoR estimates indicate that Rwanda GoR estimates indicate that Rwanda

received some received some 497.6 million USD497.6 million USD in in Official Development Assistance Official Development Assistance (ODA) in 2005.(ODA) in 2005.

This was equal to This was equal to 23% of GDP23% of GDP Equivalent to Equivalent to 55 USD per capita55 USD per capita 58%58% of this assistance came from of this assistance came from

multilateralsmultilaterals 41%41% of total ODA came in the form of of total ODA came in the form of

Budget SupportBudget Support Largest sectors in terms of volume of Largest sectors in terms of volume of

earmarked aid were earmarked aid were InfrastructureInfrastructure and and HealthHealth (12% of total ODA each) (12% of total ODA each)

Aid to Rwanda in Figures Aid to Rwanda in Figures (cont’d)(cont’d)

Tracking and monitoring of Tracking and monitoring of disbursement for foreign finance disbursement for foreign finance capital projects is difficult. This is due capital projects is difficult. This is due to incomplete information from donorsto incomplete information from donors

This leads to accumulation of large This leads to accumulation of large disbursed funds in accounts with disbursed funds in accounts with BNR, making implementation of BNR, making implementation of monetary and exchange rate policies monetary and exchange rate policies difficult and limiting aid effectivenessdifficult and limiting aid effectiveness

A study is to be conducted into why A study is to be conducted into why large balances have accumulated and large balances have accumulated and donors are requested to assist with donors are requested to assist with required informationrequired information

Background: From Background: From Global Commitments Global Commitments to Local Policyto Local Policy

Paris Declaration onAid Effectiveness

(March 2005)

Rome Declaration on

Harmonisation

(Feb 2003)

MDGs;Brussels PoA;Monterrey

Consensus;G8…In-country discussions and

consultations on aid effectivenesswith GoR and DPs

Development ofGoR Aid Policy

Implementation: Opportunities andChallenges for GoR and Partners

Developing Rwanda’s Developing Rwanda’s Aid PolicyAid Policy Adoption of Paris principles, Adoption of Paris principles,

tailored to meet Rwanda’s needs.tailored to meet Rwanda’s needs. Policy development through a Policy development through a

broad consultative process:broad consultative process: Consultation with donors in-country Consultation with donors in-country

and abroadand abroad Intra-GoR discussions and Intra-GoR discussions and

consultationsconsultations Input from NGOs and Private SectorInput from NGOs and Private Sector

A sound evidence base:A sound evidence base: In-country research activitiesIn-country research activities Learning from other LDCs Learning from other LDCs

experiencesexperiences

What does the Aid What does the Aid Policy do?Policy do? It sets out the GoR’s vision for the It sets out the GoR’s vision for the

volume, type and management of aid:volume, type and management of aid: Preferred aid modalities: General Budget Preferred aid modalities: General Budget

Support > Sector Budget Support > Support > Sector Budget Support > Projects.Projects.

All aid to be on-budget and on-plan.All aid to be on-budget and on-plan. Increase use of GoR systems in delivery of Increase use of GoR systems in delivery of

aid.aid. Pooling of funds, and delegated cooperation, Pooling of funds, and delegated cooperation,

to be encouraged.to be encouraged. Intra-GoR division of responsibilities Intra-GoR division of responsibilities

clarified.clarified. The need for further strengthening of GoR The need for further strengthening of GoR

planning, PFM and aid management planning, PFM and aid management systems.systems.

Overseeing Overseeing ImplementationImplementation

Aid Policy Implementation CommitteeMINECOFIN, Office of the President, PRIMATURE, MINAFFET, MINALOC, CNLS, HIDA

Provides high-level oversight and strategic direction

Technical SecretariatExternal Finance Unit, MINECOFIN

Works with DPs and GoR bodies to implement the interventions identified in

implementation plan

DevelopmentPartners

OFFICIAL DONORS integrate aspects of the Aid Policy in their

planning; maintain dialogue with GoR

NGOs collaborate with MINALOC andMINECOFIN to ensure assistance is

provided in an effective manner

GoREntitiesLINE MINISTRIES, LOCALADMINISTRATIONS, andSEMI-AUTONOMOUS BODIESwork with Secretariat to improveintra-GoR division of labour,strengthen GoR systemsand human resources

Sensitisation and Sensitisation and Dissemination StrategyDissemination Strategy Raising awareness of GoR bodies with Raising awareness of GoR bodies with

respect to the provisions of the Policy:respect to the provisions of the Policy: Implementation workshop(s) to be held, to Implementation workshop(s) to be held, to

work on Manual of Procedurework on Manual of Procedure Current donors are aware of the Policy Current donors are aware of the Policy

and the expectations of the GoR:and the expectations of the GoR: Communication of Policy to heads of Communication of Policy to heads of

cooperation and embassies; dialogue at cooperation and embassies; dialogue at DPCG and other foraDPCG and other fora

Raising the profile of Rwanda’s aid Raising the profile of Rwanda’s aid effectiveness initiatives abroadeffectiveness initiatives abroad Communication of Policy via Embassies Communication of Policy via Embassies

abroadabroad Participation in OECD-DAC Working Party Participation in OECD-DAC Working Party

on Aid Effectivenesson Aid Effectiveness

Clarifying GoR Aid Clarifying GoR Aid Management Management ProceduresProcedures MINECOFIN to work with line MINECOFIN to work with line

ministries, MINAFFET, local ministries, MINAFFET, local administrations and other GoR administrations and other GoR bodies to elaborate a Manual of bodies to elaborate a Manual of Procedure for aid managementProcedure for aid management

Workshops and discussions to Workshops and discussions to establish:establish: Detailed roles and responsibilitiesDetailed roles and responsibilities Timelines for completion of Timelines for completion of

negotiation and management tasksnegotiation and management tasks Systems for the sharing of Systems for the sharing of

information relating to external information relating to external assistanceassistance

Further Research and Further Research and AnalysisAnalysis Baseline Survey on the state of Aid Baseline Survey on the state of Aid

Effectiveness in RwandaEffectiveness in Rwanda OECD-DAC Survey compiled and OECD-DAC Survey compiled and

finalisedfinalised Further analysis ongoing, with sector-Further analysis ongoing, with sector-

based analysis of aid effectiveness based analysis of aid effectiveness planned for 2007, to support planned for 2007, to support development of SWApsdevelopment of SWAps

Research and recommendations on Research and recommendations on the effectiveness of “vertical” fundsthe effectiveness of “vertical” funds Particular focus on alignment and use of Particular focus on alignment and use of

GoR systems by these donors, drawing GoR systems by these donors, drawing on international experienceson international experiences

Analysis of macroeconomic effects of Analysis of macroeconomic effects of scaling up of aid flowsscaling up of aid flows

Strengthening GoR Strengthening GoR Capacities for Aid Capacities for Aid ManagementManagement Training of planning/budget staff Training of planning/budget staff

from across the GoR on aid from across the GoR on aid managementmanagement

Training of EFU staff in Training of EFU staff in negotiation skillsnegotiation skills

Strengthening of GoR systems for Strengthening of GoR systems for aid management, particularly for aid management, particularly for the collection and analysis of aid the collection and analysis of aid datadata

Training of MINECOFIN and other Training of MINECOFIN and other GoR planning/budget staff in the GoR planning/budget staff in the use of these systemsuse of these systems

Mutual Mutual AccountabilityAccountability GoR commitment to develop mechanism GoR commitment to develop mechanism

for monitoring mutual accountability for monitoring mutual accountability with its DPs. Proposal currently being with its DPs. Proposal currently being developed for discussion with DPs late developed for discussion with DPs late 2006 / early 2007.2006 / early 2007.

Dispute ResolutionDispute Resolution Commitment to agree on mechanism(s) for Commitment to agree on mechanism(s) for

dispute resolution with DPs, with a view to dispute resolution with DPs, with a view to ensuring that development programmes ensuring that development programmes and projects are not interrupted. GoR will and projects are not interrupted. GoR will seek to launch discussions around this seek to launch discussions around this with its Partners at DPCG early 2007.with its Partners at DPCG early 2007.

0

100

200

300

400

500

600

700

800

900

1,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Year

US

D m

illi

on

s

Total Net ODA(2004 prices)

…of whichemergency aid andfood aid

The Need to Scale The Need to Scale Up AidUp Aid

Civil war and Genocide

PRSP1EDPRS

forthcoming

Post-war recovery……towards longer term growth and poverty reduction

Data source: OECD-DAC

The Need to Scale The Need to Scale Up AidUp Aid Rwanda will need to scale up public Rwanda will need to scale up public

investment significantly if it is to investment significantly if it is to meet the MDGs and fulfil the meet the MDGs and fulfil the objectives of Vision 2020.objectives of Vision 2020.

The forthcoming costing of the The forthcoming costing of the EDPRS should offer an accurate EDPRS should offer an accurate picture of Rwanda’s additional picture of Rwanda’s additional resource needs in the medium-term.resource needs in the medium-term.

Rough estimates by the IMF Rough estimates by the IMF suggest that even with higher suggest that even with higher revenue mobilisation, the annual revenue mobilisation, the annual resource gap to meet the MDGs resource gap to meet the MDGs would average around would average around US$1 billionUS$1 billion (2006 prices) (2006 prices) during 2009-2020during 2009-2020..

The Need to Scale The Need to Scale Up AidUp AidKey Issues to be given consideration;Key Issues to be given consideration; Need to maintain macro economic Need to maintain macro economic

stability; manage stability; manage Dutch disease Dutch disease effecteffect

Target investiment to areas that will Target investiment to areas that will have quick and longterm impact on have quick and longterm impact on economic growth and poverty economic growth and poverty reduction; Infrastructure, reduction; Infrastructure, AgricultureAgriculture

Capacity building; human and Capacity building; human and institutionalinstitutional

Structural reforms to foster private Structural reforms to foster private sector devtsector devt

The Need to Scale The Need to Scale Up AidUp Aid Maintain debt sustainability; more Maintain debt sustainability; more

grants vs debt; debt must be highly grants vs debt; debt must be highly concessionalconcessional

However after MDRI and Debt However after MDRI and Debt cancellation there is no clarity cancellation there is no clarity regarding existing loan commitments regarding existing loan commitments for ongoing projects (eg. AFDB and for ongoing projects (eg. AFDB and IDA projects loans). IDA projects loans).

Current disbursements as loans will Current disbursements as loans will increase the debt stock and could increase the debt stock and could recreate an unsustainable debt recreate an unsustainable debt situation. There is a need for the donor situation. There is a need for the donor community to examine this situation community to examine this situation and find a solution and find a solution

CONCLUSIONCONCLUSION Successful implementation of the Successful implementation of the

Aid Policy will have a significant Aid Policy will have a significant positive impact on aid effectiveness, positive impact on aid effectiveness, and this in turn will be translated and this in turn will be translated into more efficient public into more efficient public investments and service delivery to investments and service delivery to the benefit of the Rwandan citizen, the benefit of the Rwandan citizen, especially the poor.especially the poor.

The need for scaling up is real.The need for scaling up is real.Let us work closely together to Let us work closely together to address the various issues related address the various issues related to it. to it.

I THANK YOUI THANK YOU