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

Presentation Outline Aid to Rwanda in figures Aid to Rwanda in figures Background to Aid Effectiveness initiatives at the national and international level Background to Aid Effectiveness initiatives at the national and international level Process of developing Aid Policy Process of developing Aid Policy Overview of Aid Policy content Overview of Aid Policy content Focus on Implementation: Who, What and How Focus on Implementation: Who, What and How The need to scale up aid to Rwanda The need to scale up aid to Rwanda

Aid to Rwanda in Figures GoR estimates indicate that Rwanda received some million USD in Official Development Assistance (ODA) in GoR estimates indicate that Rwanda received some million USD in Official Development Assistance (ODA) in This was equal to 23% of GDP This was equal to 23% of GDP Equivalent to 55 USD per capita Equivalent to 55 USD per capita 58% of this assistance came from multilaterals 58% of this assistance came from multilaterals 41% of total ODA came in the form of Budget Support 41% of total ODA came in the form of Budget Support Largest sectors in terms of volume of earmarked aid were Infrastructure and Health (12% of total ODA each) Largest sectors in terms of volume of earmarked aid were Infrastructure and Health (12% of total ODA each)

Aid to Rwanda in Figures (cont’d) Tracking and monitoring of disbursement for foreign finance capital projects is difficult. This is due to incomplete information from donors Tracking and monitoring of disbursement for foreign finance capital projects is difficult. This is due to incomplete information from donors This leads to accumulation of large disbursed funds in accounts with BNR, making implementation of monetary and exchange rate policies difficult and limiting aid effectiveness This leads to accumulation of large disbursed funds in accounts with BNR, making implementation of monetary and exchange rate policies difficult and limiting aid effectiveness A study is to be conducted into why large balances have accumulated and donors are requested to assist with required information A study is to be conducted into why large balances have accumulated and donors are requested to assist with required information

Background: From Global Commitments to Local Policy Paris Declaration on Aid Effectiveness (March 2005) Rome Declaration on Harmonisation (Feb 2003) MDGs; Brussels PoA; Monterrey Consensus; G8… In-country discussions and consultations on aid effectiveness with GoR and DPs Development of GoR Aid Policy Implementation: Opportunities and Challenges for GoR and Partners

Developing Rwanda’s Aid Policy Adoption of Paris principles, tailored to meet Rwanda’s needs. Adoption of Paris principles, tailored to meet Rwanda’s needs. Policy development through a broad consultative process: Policy development through a broad consultative process: Consultation with donors in-country and abroad Consultation with donors in-country and abroad Intra-GoR discussions and consultations Intra-GoR discussions and consultations Input from NGOs and Private Sector Input from NGOs and Private Sector A sound evidence base: A sound evidence base: In-country research activities In-country research activities Learning from other LDCs experiences Learning from other LDCs experiences

What does the Aid Policy do? It sets out the GoR’s vision for the volume, type and management of aid: It sets out the GoR’s vision for the volume, type and management of aid: Preferred aid modalities: General Budget Support > Sector Budget Support > Projects. Preferred aid modalities: General Budget Support > Sector Budget Support > 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 aid. Increase use of GoR systems in delivery of aid. Pooling of funds, and delegated cooperation, to be encouraged. Pooling of funds, and delegated cooperation, to be encouraged. Intra-GoR division of responsibilities clarified. Intra-GoR division of responsibilities clarified. The need for further strengthening of GoR planning, PFM and aid management systems. The need for further strengthening of GoR planning, PFM and aid management systems.

Overseeing Implementation Aid Policy Implementation Committee MINECOFIN, Office of the President, PRIMATURE, MINAFFET, MINALOC, CNLS, HIDA  Provides high-level oversight and strategic direction Technical Secretariat External Finance Unit, MINECOFIN  Works with DPs and GoR bodies to implement the interventions identified in implementation plan Development Partners OFFICIAL DONORS integrate aspects of the Aid Policy in their planning; maintain dialogue with GoR NGOs collaborate with MINALOC and MINECOFIN to ensure assistance is provided in an effective manner GoR Entities LINE MINISTRIES, LOCAL ADMINISTRATIONS, and SEMI-AUTONOMOUS BODIES work with Secretariat to improve intra-GoR division of labour, strengthen GoR systems and human resources

Sensitisation and Dissemination Strategy Raising awareness of GoR bodies with respect to the provisions of the Policy: Raising awareness of GoR bodies with respect to the provisions of the Policy: Implementation workshop(s) to be held, to work on Manual of Procedure Implementation workshop(s) to be held, to work on Manual of Procedure Current donors are aware of the Policy and the expectations of the GoR: Current donors are aware of the Policy and the expectations of the GoR: Communication of Policy to heads of cooperation and embassies; dialogue at DPCG and other fora Communication of Policy to heads of cooperation and embassies; dialogue at DPCG and other fora Raising the profile of Rwanda’s aid effectiveness initiatives abroad Raising the profile of Rwanda’s aid effectiveness initiatives abroad Communication of Policy via Embassies abroad Communication of Policy via Embassies abroad Participation in OECD-DAC Working Party on Aid Effectiveness Participation in OECD-DAC Working Party on Aid Effectiveness

Clarifying GoR Aid Management Procedures MINECOFIN to work with line ministries, MINAFFET, local administrations and other GoR bodies to elaborate a Manual of Procedure for aid management MINECOFIN to work with line ministries, MINAFFET, local administrations and other GoR bodies to elaborate a Manual of Procedure for aid management Workshops and discussions to establish: Workshops and discussions to establish: Detailed roles and responsibilities Detailed roles and responsibilities Timelines for completion of negotiation and management tasks Timelines for completion of negotiation and management tasks Systems for the sharing of information relating to external assistance Systems for the sharing of information relating to external assistance

Further Research and Analysis Baseline Survey on the state of Aid Effectiveness in Rwanda Baseline Survey on the state of Aid Effectiveness in Rwanda OECD-DAC Survey compiled and finalised OECD-DAC Survey compiled and finalised Further analysis ongoing, with sector-based analysis of aid effectiveness planned for 2007, to support development of SWAps Further analysis ongoing, with sector-based analysis of aid effectiveness planned for 2007, to support development of SWAps Research and recommendations on the effectiveness of “vertical” funds Research and recommendations on the effectiveness of “vertical” funds Particular focus on alignment and use of GoR systems by these donors, drawing on international experiences Particular focus on alignment and use of GoR systems by these donors, drawing on international experiences Analysis of macroeconomic effects of scaling up of aid flows Analysis of macroeconomic effects of scaling up of aid flows

Strengthening GoR Capacities for Aid Management Training of planning/budget staff from across the GoR on aid management Training of planning/budget staff from across the GoR on aid management Training of EFU staff in negotiation skills Training of EFU staff in negotiation skills Strengthening of GoR systems for aid management, particularly for the collection and analysis of aid data Strengthening of GoR systems for aid management, particularly for the collection and analysis of aid data Training of MINECOFIN and other GoR planning/budget staff in the use of these systems Training of MINECOFIN and other GoR planning/budget staff in the use of these systems

Mutual Accountability GoR commitment to develop mechanism for monitoring mutual accountability with its DPs. Proposal currently being developed for discussion with DPs late 2006 / early GoR commitment to develop mechanism for monitoring mutual accountability with its DPs. Proposal currently being developed for discussion with DPs late 2006 / early Dispute Resolution Commitment to agree on mechanism(s) for dispute resolution with DPs, with a view to ensuring that development programmes and projects are not interrupted. GoR will seek to launch discussions around this with its Partners at DPCG early Commitment to agree on mechanism(s) for dispute resolution with DPs, with a view to ensuring that development programmes and projects are not interrupted. GoR will seek to launch discussions around this with its Partners at DPCG early 2007.

, Year USD millions Total Net ODA (2004 prices) …of which emergency aid and food aid The Need to Scale Up Aid Civil war and Genocide PRSP1 EDPRS forthcoming Post-war recovery… …towards longer term growth and poverty reduction Data source: OECD-DAC

The Need to Scale Up Aid Rwanda will need to scale up public investment significantly if it is to meet the MDGs and fulfil the objectives of Vision Rwanda will need to scale up public investment significantly if it is to meet the MDGs and fulfil the objectives of Vision The forthcoming costing of the EDPRS should offer an accurate picture of Rwanda’s additional resource needs in the medium-term. The forthcoming costing of the EDPRS should offer an accurate picture of Rwanda’s additional resource needs in the medium-term. Rough estimates by the IMF suggest that even with higher revenue mobilisation, the annual resource gap to meet the MDGs would average around US$1 billion (2006 prices) during Rough estimates by the IMF suggest that even with higher revenue mobilisation, the annual resource gap to meet the MDGs would average around US$1 billion (2006 prices) during

The Need to Scale Up Aid Key Issues to be given consideration; Need to maintain macro economic stability; manage Dutch disease effect Need to maintain macro economic stability; manage Dutch disease effect Target investiment to areas that will have quick and longterm impact on economic growth and poverty reduction; Infrastructure, Agriculture Target investiment to areas that will have quick and longterm impact on economic growth and poverty reduction; Infrastructure, Agriculture Capacity building; human and institutional Capacity building; human and institutional Structural reforms to foster private sector devt Structural reforms to foster private sector devt

The Need to Scale Up Aid Maintain debt sustainability; more grants vs debt; debt must be highly concessional Maintain debt sustainability; more grants vs debt; debt must be highly concessional However after MDRI and Debt cancellation there is no clarity regarding existing loan commitments for ongoing projects (eg. AFDB and IDA projects loans). However after MDRI and Debt cancellation there is no clarity regarding existing loan commitments for ongoing projects (eg. AFDB and IDA projects loans). Current disbursements as loans will increase the debt stock and could recreate an unsustainable debt situation. There is a need for the donor community to examine this situation and find a solution Current disbursements as loans will increase the debt stock and could recreate an unsustainable debt situation. There is a need for the donor community to examine this situation and find a solution

CONCLUSION Successful implementation of the Aid Policy will have a significant positive impact on aid effectiveness, and this in turn will be translated into more efficient public investments and service delivery to the benefit of the Rwandan citizen, especially the poor. Successful implementation of the Aid Policy will have a significant positive impact on aid effectiveness, and this in turn will be translated into more efficient public investments and service delivery to the benefit of the Rwandan citizen, especially the poor. The need for scaling up is real. Let us work closely together to address the various issues related to it. The need for scaling up is real. Let us work closely together to address the various issues related to it.

I THANK YOU