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

Presentation Outline. Aid to Rwanda in figuresBackground to Aid Effectiveness initiatives at the national and international levelProcess of developing Aid PolicyOverview of Aid Policy contentFocus on Implementation: Who, What and HowThe need to scale up aid to Rwanda. Aid to Rwanda in Figures.

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

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    1. 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

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

    3. Aid to Rwanda in Figures GoR estimates indicate that Rwanda received some 497.6 million USD in Official Development Assistance (ODA) in 2005. This was equal to 23% of GDP Equivalent to 55 USD per capita 58% of this assistance came from multilaterals 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)

    4. 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 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

    5. Background: From Global Commitments to Local Policy

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

    7. What does the Aid Policy do? 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. All aid to be on-budget and on-plan. Increase use of GoR systems in delivery of aid. Pooling of funds, and delegated cooperation, to be encouraged. Intra-GoR division of responsibilities clarified. The need for further strengthening of GoR planning, PFM and aid management systems.

    8. Overseeing Implementation

    9. Sensitisation and Dissemination Strategy 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 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 Raising the profile of Rwanda’s aid effectiveness initiatives abroad Communication of Policy via Embassies abroad Participation in OECD-DAC Working Party on Aid Effectiveness

    10. 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 Workshops and discussions to establish: Detailed roles and responsibilities Timelines for completion of negotiation and management tasks Systems for the sharing of information relating to external assistance

    11. Further Research and Analysis Baseline Survey on the state of Aid Effectiveness in Rwanda OECD-DAC Survey compiled and finalised 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 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

    12. Strengthening GoR Capacities for Aid Management Training of planning/budget staff from across the GoR on aid management Training of EFU staff in negotiation skills 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

    13. 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 2007.

    14. The Need to Scale Up Aid As we have heard over the course of this conference, Rwanda’s long term economic growth and poverty reduction is reliant on a significant increase in public investments over the medium term. Whilst the GoR is putting in place measures to increase domestic revenue, there will still be a need for a significant increase in external assistance. The graph here shows the volume of aid provided to Rwanda by its donors over time. As you can see, there is a peak in the immediate post-war period, around 1995, and much of this was accounted for by the large influx of emergency and food aid. We can see however, that after the war, net official development assistance to Rwanda fell back to its pre-war levels of aid, around which we find ourselves today. Whilst the graph above is in constant prices, let us not forget that we have a much bigger population now, and a population which is set to grow. It is therefore surprising to see that, despite a number of international commitments to scale up development assistance, little progress has been seen in this area in Rwanda.As we have heard over the course of this conference, Rwanda’s long term economic growth and poverty reduction is reliant on a significant increase in public investments over the medium term. Whilst the GoR is putting in place measures to increase domestic revenue, there will still be a need for a significant increase in external assistance. The graph here shows the volume of aid provided to Rwanda by its donors over time. As you can see, there is a peak in the immediate post-war period, around 1995, and much of this was accounted for by the large influx of emergency and food aid. We can see however, that after the war, net official development assistance to Rwanda fell back to its pre-war levels of aid, around which we find ourselves today. Whilst the graph above is in constant prices, let us not forget that we have a much bigger population now, and a population which is set to grow. It is therefore surprising to see that, despite a number of international commitments to scale up development assistance, little progress has been seen in this area in Rwanda.

    15. 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 2020. 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 2009-2020.

    16. The Need to Scale Up Aid Key Issues to be given consideration; 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 Capacity building; human and institutional Structural reforms to foster private sector devt

    17. The Need to Scale Up Aid 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). 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

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

    19. I THANK YOU

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