This note discusses aid. Rwanda: aid management from 2002 to 2011 SUMMARY COUNTRY LEARNING NOTES. Bruno Versailles. April 2012

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1 COUNTRY LEARNING NOTES Rwanda: aid management from 2002 to 2011 Bruno Versailles April 2012 SUMMARY Between 2002 and 2006 there was an increase in the amount of budget support Rwanda received. The government s Poverty Reduction Strategy paper, together with the Rome and Paris declarations, helped Rwanda s political leadership and like-minded development partners to push a harmonisation and alignment agenda. The release of the 2006 Aid Policy proved to be a watershed moment in the history of aid management in Rwanda. It was strong on government ownership of the development agenda and gave the Rwandan government a framework by which to hold development partners to account. The 2008 Aid Procedures Manual (adopted by Cabinet in 2011), together with other recent initiatives, showed the government s determination for project aid to use Rwanda s own systems. Improvements in the quality of the Rwandan government s public finance management systems have not been matched by increased use of country systems by donors. This note discusses aid management in Rwanda between The note is organised around different milestones in Rwanda s aid management - including the 2002 Poverty Reduction Strategy Paper (PRSP), 1 the 2006 Rwanda Aid Policy (RAP), the 2007 Economic Development and Poverty Reduction Strategy (EDPRS) and the 2008 Aid Procedures Manual. 2 The note details the development of Rwanda s aid management structures and is a useful background document to read together with other Country Briefing Notes which discuss certain aid management initiatives in more detail. These include Rwanda: mutual accountability framework and Rwanda: establishing Single Project Implementation Units. An overview of all of Rwanda s aid management structures can be found in Figure 1 overleaf.

2 FIGURE 1: AID COORDINATION ARCHITECTURE IN RWANDA GoR: Pres/PM (main speaker) Minister of Finance (chair) Line ministries DEVELOPMENT PARTNERS MEETING (DPM) - biennial DONORS: UN Res Rep (chair) HQ Ambassadors Senior country staff DIPLOMATIC Public/private sector reps GoR: MINECOFIN (chair) Line ministries (as nec.) DONORS: UN Res Rep (chair) Ambassadors/heads of cooperation Senior technical/advisory staff DEVELOPMENT PARTNERS COORDINATION GROUP (DPCG) - 7/8 times a year EXTERNAL FINANCE UNIT (MINECOFIN) functions as the DPCG Secretariat NGOs Organises the annual Development Partners Retreat (DPR) OPERATIONAL/MANAGEMENT Annual EDPRS Review and DPAF assessment GoR: MINECOFIN (chair) Line ministries (as nec.) DONORS: Budget support donors Non-budget support donors have observer status BUDGET SUPPORT HARMONISATION GROUP (BSHG) - semi-annually 13 SECTORAL WORKING GROUPS (SWGs) Responsible for joint sector reviews GoR: Lead Ministry (chair) Other relevant ministries Decentralised entities Budget/Planning departments MINECOFIN DONORS: Lead donors TECHNICAL/OPERATIONAL Other relevant donors AID MANAGEMENT IN THE PRSP I PERIOD ( ) 3 The early experience of aid in post-genocide Rwanda was one of chaos with many uncoordinated activities funded by a myriad of aid agencies. The Government of Rwanda s (GoR) early initiatives to coordinate aid were hampered by limited human resources, poor management and unwilling donors. In 1998 the GoR created the Central Bureau for Public Investments and External Funding (CEPEX) responsible for the monitoring of public investment, mobilising external resources and managing donor coordination. However, CEPEX s mandate clashed with both line ministries (on e.g. project management) and The Ministry of Finance and Economic Planning (MINECOFIN) proper (on the development budget and overall aid management). These coordination problems meant that certain aid and budget management functions were executed in parallel.

3 By 2002 one of the main problems was the standalone character of Rwanda s development budget, which was basically a collection of externally funded projects. In managing this CEPEX was not helped by Development Partners (DP s) recalcitrance to share information, let alone put their aid on-budget. 4 The problems related to the integration of the development and the recurrent budgets did not imply that aid coordination did not improve, however, Rwanda s first PRSP, published in 2002 (with an interim PRSP published in 2000), meant that for the first time since the 1994 war and genocide there was an overall coherent development strategy which DPs could support and fund. Furthermore, the 2003 Rome declaration on harmonisation and the 2005 Paris Declaration combined to put aid effectiveness firmly on the agendas of both the Rwandan Government and the Development Partners. These events led to a flurry of aid effectiveness activities. Rwanda s current (as of June 2011) major aid management institutions were created in this period (see Figure 1 above): The annual Development Partners Meeting (DPM), which initially grew out of foreignheld donor roundtables, was instituted in The 2010 DPM was the 9th version (it has recently become biennial). The DPM is a high-level gathering of senior GoR and DP officials where policy priorities and funding needs are discussed. The main forum for dialogue on the ground is the monthly (since 2007, 7 to 8 times a year) Development Partners Coordination Group (DPCG) established in late In the wake of the PRSP, DPs, led by The Department For International Development (DFID ) and the European Community (EC), launched the Rwanda Harmonisation and Alignment Initiative (RHAI), which effectively sought to implement and translate the Rome Declaration to a Rwandan context. With most other major DPs for Rwanda present in RHAI meetings this was a useful setting for sensitising and cajoling DPs into delivering higher quality aid. 5 In November 2003, budget support (BS) donors and the Government of Rwanda signed a partnership agreement on harmonisation and alignment of budget support. The Budget Support Harmonisation Group (BSHG) was formed in the wake of this agreement and was set up as a working group under the DPCG. As the number of BS donors increased the BSHG gained importance and is now the forum for policy dialogue and mutual accountability in its own right. The Harmonisation and Alignment in Rwanda for Programmes and Projects (HARPP) Group was formed in 2004 to promote harmonisation and alignment (H&A) of programme and project support at country level. This initiative was pushed by non-budget support donors that wanted a grouping of their own to make headway on the project aid modality. 6 It was seen at the time for non-budget support donors to provide a counter-weight to the BSHG. These three structures (RHAI, BSHG, HARPP) had different experiences depending on the needs of GoR and DPs at the time. The RHAI was disbanded reasonably quickly when it became clear that other groups with more GoR presence were taking over its H&A agenda (notably the DPCG and later also the BSHG). It did help however in sensitising DPs and GoR alike about H&A. The HARPP was disbanded in again to prevent unnecessary duplication of harmonisation structures. The HARPP was much less successful in its efforts to put H&A on the agenda of more project-minded DPs. This was because (i) over-stretched senior GoR officials chose to focus on the easier budget support than H&A, which was also their preferred aid modality (as shown later in the 2006 Aid Policy) and (ii) project-minded DPs were not very interested in making progress on H&A issues. A third cause might well be that GoR also didn t really have a clear idea as to where it wanted DPs to go on project issues. This is linked to difficulties related to sector level and district level coordination -which was, and is, often problematic. Mostly, it depends on whether the DPs in the respective sectors are willing to engage on H&A issues.

4 THE EXTERNAL FINANCE UNIT AND THE 2006 AID POLICY ( ) In 2005 the GoR moved the responsibility for external resource mobilisation and aid coordination into the newly formed External Finance Unit (EFU) within MINECOFIN, leaving CEPEX with only project management to deal with. This was a reflection of the GoR s wish to focus more on high-level policy and aid dialogue with donors and the need for a dedicated structure for this within MINECOFIN proper - whereas CEPEX had always focused more on project management. In the wake of the 2005 Paris declaration a push also came from DPs as they funded the Aid Coordination Unit (ACU) through a basket fund, administered by The United Nations Development Project (UNDP), funding technical assistance (TA) that quickly started working closely alongside the EFU on aid effectiveness issues. 7 BOX 1 : RWANDA S AID POLICY (BASED ON MINECOFIN, 2006) The RAP is the guiding framework which sets out GoR s wishes to see the country s aid architecture develop. It outlines the GoR s preferences in terms of the type of aid it wishes to attract and the processes to be used in the management of external assistance. THE RAP CLARIFIES THE GOR S POSITION: Aid Preferences: General budget support (GBS) is preferred, followed by sector budget support (SBS) and project support. Stand-alone projects must be on-budget and on-plan. Pooling of project funds is encouraged. Assistance to Decentralized Entities: Is to be channelled through the national budget or through the Common Development Fund to make sure that benefits are shared more equitably amongst districts. Sustainable External Debts: The GoR seeks more assistance in the form of grants. If loans are to be accepted they must be highly concessional. Vertical Funds as a Concern: Vertical funds tend to be off-plan and off-budget and are thus a concern for the GoR. The GoR will develop guidelines on the management of such funds. Preference for Joint Missions and Analytical Work, and Delegated Cooperation: These reduce transaction costs for the GoR and donors. THE RAP CLARIFIES THE GOR S POSITION: Aid Acceptance: The GoR will refuse aid if the aid is not sufficiently aligned to the GoR s priorities or if there are excessive conditions tied to receiving the aid. Clarification of Division of Responsibilities for GoR Agencies: line ministries retain technical ownership of their development activities. IT PLACES EXPECTATIONS ON DPS: Increased Alignment: Assistance is offered in a way that meets the needs identified in the GoR s strategic plans rather than being donor-driven. Technical Assistance: Technical assistance is provided in a coordinated manner through national systems. It includes mechanisms to ensure the transfer of knowledge. National Monitoring and Evaluation System: The GoR encourages donors to use such systems to reduce the burden on both donors and government. Data on Aid Flows: Data is collected from DPs in a structured manner using the Development Assistance Database (DAD). This information is shared between all. Coordination: Donors and the GoR work together to avoid duplication or crowding in certain sectors and sub-sectors.

5 During this period the GoR, supported by the ACU, started work on the Rwandan Aid Policy (RAP) - endorsed by the Cabinet in July The RAP is a statement of the GoR s position on aid without being overly negotiated with DPs, who all signed up to the RAP s principles. Even though some DPs were probably at the time only paying lip-service to the RAP, the policy has proved immensely useful in having a reference document for which to hold DPs to account. It also helped in developing Rwanda s mutual accountability framework - details of which can be found in the briefing note Rwanda s mutual accountability framework also saw the start of another very useful institution: the annual Development Partners Retreat (DPR). The DPR has proven to very valuable as a way of building relationships between senior GoR officials and senior DP staff by discussing topics of importance to both DPs and the GoR in an informal setting. The DPR takes place outside of Kigali and typically lasts a couple of days. IMPLEMENTATION AND CONSOLIDATION UNDER EDPRS ( ) Up until publication of the Aid Policy, progress on aid management had been very much ad-hoc and dependent on GoR personalities and a few likeminded DPs battling away towards meeting the challenges set out by the Paris declaration. Now there is much more institutionalisation of where the GoR wants to go (in part this was only possible thanks to Paris and these likeminded DPs changing perceived wisdoms). This is now well reflected in the sophisticated Donor Performance Assessment Framework (DPAF) by which the GoR holds DPs to account. The DPAF reflects the increasing confidence of the Rwandan Government in managing its external resources and the DPAF set-up shows the assertiveness by which the GoR tells Development Partners how and where to put their aid money. Recent initiatives such as the Single Project Implementation Units (SPIUs) and the Single Treasury Account (STA) show how the Government leads on aid issues with DPs following. This shows that (i) DPs respect the GoR s increased competence on all aid matters, and (ii) there is space for recipient governments to push through aid initiatives even though not all DPs might warm to these initially. AID POLICY IMPLEMENTATION AND AID PROCEDURES MANUAL The 2006 Aid Policy set out the overarching framework for Rwanda s aid management and is as such quite general. This was done because (i) including operational details might quickly outdate the Policy and (ii) it was hard to prescribe a level of detail on DPs when the Rwandan government itself was not yet fully sure of its own commitments. The Aid Policy relegated operational issues to a manual of aid procedures that would detail procedures related to the soliciting, negotiation and management of external assistance (GoR, 2006, p10). This was not done until 2008, however, and between 2006 and 2008 the GoR struggled with implementation of the Aid Policy. A good example of this is the fate of the highlevel committee that was formed in 2006 to oversee implementation of the RAP but which in the end only met once. The Aid Procedures manual was eventually written in For the first time the manual wrote down procedures related to project management with the chapter on budget support mainly repeating what was already happening in the BSHG (see box 2 for an overview of the contents of the aid procedures manual). As such it brought the project aid modality to the fore and started a process within the GoR on how to make project aid better.

6 BOX 2 : RWANDA S AID PROCEDURES MANUAL (BASED ON MINECOFIN, 2011) OBJECTIVES The main objective of the manual is to provide the GoR with procedures to guide and improve implementation of the RAP with the overall aim to improve aid effectiveness in Rwanda. ORGANISATION The manual is organised around a number of procedures. These appear in boxes and always include (1) a description of the task(s) to be performed, (2) the time-frame in which this task is to be performed, (3) which GoR institution carries responsibility for performing the task(s), and (4) which documents and other institutions should be consulted. An example is provided below: Procedure 5: Investment projects to be recorded when they become pipeline Task: All pipeline projects to be captured in the DAD. Time-frame: within 2 weeks of a project becoming pipeline. Institution: Public Investment Secretariat in collaboration with National Development Planning and Research Directorate and EFU Consult: National Public Investment Policy, also NBU for links with Development Budget. CONTENT Chapter 1 gives an overview of aid types and GoR institutions involved in aid management. Chapters 2 to 4 deal with project support, budget support and technical assistance respectively. Chapter 5 shows how aid is integrated into the national planning, budgeting and medium term expenditure framework (MTEF) cycles. Chapter 6 has procedures on how aid should use Rwandan public financial management (PFM) institutions and chapter 7 talks very briefly about tax exemptions saw a renewed effort of bringing the aid procedures manual to the table and a slightly revised version of the manual was adopted by the abinet in February The manual is set to become another important reference document like the Aid Policy, but will probably be more useful as a background document rather than as a clear manual that can be implemented. There are three reasons for this: (i) it suffers from the tension between documenting how things were being done at the time of writing and how the GoR wanted things to happen in the future; 8 (ii) it tries to account for the multitude of aid types flowing into Rwanda; and (iii) it identifies procedures and tasks that are not yet very well defined in the Rwandan context. As a consequence it is also not entirely clear which GoR agency is responsible for these tasks and procedures. The manual thus shows the limits to what can be achieved by grouping highly diverse external finance flows under the banner of aid. Hence the manual was supposed to document procedures that are still in the process of being reformed. One good example is the Single Project Implementation Units (SPIUs) which were added in the 2011 version, but the point of a procedures manual is of course that one should not need to re-write it too often. Nevertheless, the procedures manual did put the focus back on the project aid modality, with the GoR again going for piecemeal, but focused reforms like the SPIUs or the Single Treasury Account to improve the quality of project aid. These are very practical reforms showing its desire to DPs to see the Paris Declaration donor commitments on country systems improved more fully 10 and signalling that the GoR takes use of its own systems very seriously.

7 CONCLUSION The past ten years have shown that it is possible for a recipient government to take firm control over the management of external aid inflows and that there is more negotiating / cajoling space to make DPs follow a recipient government s lead than is perhaps generally accepted. Rwanda first tackled the management of budget support and started working on bringing project support into the GoR s systems more recently. This makes perfect sense as the former is easier to deal with than the latter. A phased approach, with the recipient government focusing on one aid modality, at the time proved to be a good strategy. The Aid Policy shows the advantage of having an agreed policy to which DPs could be held accountable. The Policy thus helped in developing Rwanda s Donor Performance Assessment Framework (DPAF) - which is considered international best practice. The aid procedures manual shows the limits to what can be achieved by grouping highly diverse external finance flows all under the banner of aid. Even though the manual will be useful as a reference document, implementation will probably again be more piecemeal as can already be seen with the development of the Single Project Implementation Units (SPIU) and the Single Treasury Account (STA).

8 ENDNOTES 1. The period just after the 1994 genocide was marked by largely uncoordinated humanitarian aid. This is not discussed here. 2. See MINECOFIN (2002), GoR (2006), MINECOFIN (2007) and MINECOFIN (2008) respectively. 3. This section relies heavily on Hayman (2007). 4. For more on budget integration see the briefing note Integration of the Recurrent and Development Budgets in Rwanda. 5. See RHAI (2003) for a position note describing the agenda the RHAI group tried to address: This paper is intended to form the first step of a structured process by which development partners can increasingly align their aid and practice in support of the Rwandan PRS, and through harmonisation, increase the exent of commonality in donor policies, procedures and practices at national level (RHAI, 2003, p1). 6. The initial HARPP aide memoire lists five work areas: (i) better cooperation/harmonization on the identification & agreement of projects, (ii) review of project support and a mapping exercise in a pilot sector, (iii) harmonisation of certain aspects of project aid such as remuneration of consultants and national employees, aspects of contracts, audit and procurement for projects, (iv) development of project-related indicators for aid effectiveness, and (v) alignment of project cycles with GoR cycles (see Smirl, 2004 for more details). 7. The ACU was originally set up to be the secretariat of the DPCG. From 2006 onwards, its focus became more supplying the EFU with TA. 8. The Aid Policy itself suffered much less from this problem as it was much more general in nature, whereas the aid procedures manual goes into much more detail and is as such almost impossible to negotiate with a large number of DPs. 9. See the briefing note Single Project Implementation Units in Rwanda. 10. Note that Rwanda, according to recent studies such as the PEFA (2010) or the World Bank s CPIA, is making good progress on the quality of its Public Financial Management systems. Thus far, these improvements have however not been met by increased donor use of those systems. BIBLIOGRAPHY Government of Rwanda (2006) Rwanda Aid Policy, endorsed by Cabinet on 27th July, accessed at &%20A/H%20&%20A%20Local/Aid%20Policy/Aid_Policy.pdf Hayman, Rachel (2005) Coordinating in a complex political environment: the European Union, its Member States and Aid Coordination in Rwanda, paper presented at the 11th EADI General Conference, Bonn September Hayman, Rachel (2007) Milking the Cow Negotiating ownership of aid and policy in Rwanda, Managing Aid Dependency Project, GEG working paper 2007/26, accessed at MINECOFIN (2002) Poverty Reduction Strategy Paper, Kigali, June, accessed at MINECOFIN (2006) Aid Policy Overview, accessed at Aid%20Policy/Aid_Policy_Overview.pdf MINECOFIN (2007) Economic Development and Poverty Reduction Strategy, Kigali, September, accessed at worldbank.org/intrwanda/resources/edprs-english.pdf MINECOFIN (2008) Manual for the Mobilisation, Negotiation and Management of External Assistance - draft, 27 October, Kigali. MINECOFIN (2011) Rwanda Aid Policy Manual of Procedures, Kigali, September. RHAI (2003) Enhancing Aid Effectiveness and Efficiency, Rwanda Poverty Reduction Strategy Harmonisation and Alignment Initiative (RHAI), DFID and EC country offices, Kigali. Smirl, Lisa (2004) Aide Memoire Harmonization and Alignment in Rwanda of Programmes and Projects, Technical Working Group Meeting #1, Office of the United Nations Resident Coordinator for Rwanda, Kigali, The Country Learning Notes series is intended as a tool for policy makers and practitioners to learn from the experiences of other countries. Each note focuses on a specific country and a particular policy area, documenting the challenges faced and decisions taken to overcome them. The series can be freely downloaded from For more information please contact bsi-research@odi.org.uk. Readers are encouraged to reproduce material from the Country Learning Notes series for their own publications, as long as they are not being sold commercially. As copyright holder, ODI requests due acknowledgement and a copy of the publication. For online use, we ask readers to link to the original resource on The views presented in this paper are those of the author(s) and do not necessarily represent the views of ODI. Overseas Development Institute 2012 Budget Strengthening Initiative Overseas Development Institute 111 Westminster Bridge Road London, SE1 7JD