IMPLEMENTATION COMPLETION AND RESULTS REPORT (Credit No RW and Grant No s. H130-RW, H189-RW, H260-RW) CREDIT/GRANTS

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Human Development III Country Department 9 Africa Regional Office Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (Credit No RW and Grant No s. H130-RW, H189-RW, H260-RW) ON CREDIT/GRANTS IN THE AMOUNT OF SDR116 MILLION (US$170 MILLION EQUIVALENT) TO THE REPUBLIC OF RWANDA FOR THE FIRST POVERTY REDUCTION SUPPORT CREDIT/GRANT, SECOND POVERTY REDUCTION SUPPORT GRANT AND THIRD POVERTY REDUCTION SUPPORT GRANT June 30, 2008 Report No: ICR

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 13, 2008) Currency Unit Rwanda Franc US$ FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS CDF COMESA CPAF CPIP CRC CSC CSR DHS EAC EDPRS EPZ GDP GNI GoR HIPC HLSS ICT NBR MDG MINECOFIN MTEF ORTPN PBF PDO PER PETS PFM PRGF PRSC/G PRSP PSTA RADA RARDA REMA RIEPA SWAp Country Assistance Strategy Common Development Fund Common Market for Eastern and Southern Africa Common Performance Assessment Framework Country Procurement Issues Paper Citizens Report Cards Citizens Score Cards Caisse Sociale du Rwanda Demographic Health Survey East African Community Economic Development and Poverty Reduction Strategy Export Processing Zone Gross Domestic Product Gross National Income Government of Rwanda Heavily Indebted Poor Countries Household Living Standard Survey Information Communications Technology National Bank of Rwanda Millennium Development Goal Ministry of Finance and Economic Planning Medium Term Economic Framework Rwanda Office of Tourism and National Parks Performance Based Financing Program Development Objective Public Expenditure Review Public Expenditure Tracking Survey Public Financial Management Poverty Reduction Growth Facility Poverty Reduction Credit/Grant Poverty Reduction Strategic Paper Strategic Plan for Agricultural Transformation Rwanda Agricultural Development Authority Rwanda Animal Resource Development Authority Rwanda Environmental Management Authority Rwanda Investment and Export Promotion Agency Sector Wide Approach Vice President: Country Director: Sector Manager: Project Team Leader: ICR Team Leader: ICR Co-Authors: Obiageli Katryn Ezekwesili Colin Bruce Lynne D. Sheburne-Benz Agnes L. B. Soucat Annika Kjellgren Annika Kjellgren, Allison Berg

3 REPUBLIC OF RWANDA IMPLEMENTATION COMPLETION AND RESULTS REPORT FIRST POVERTY REDUCTION SUPPORT CREDIT/GRANT, SECOND POVERTY REDUCTION SUPPORT GRANT, AND THIRD POVERTY REDUCTION SUPPORT GRANT Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring CONTENTS 1. Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annexes Annex 1. Bank Lending and Implementation Support/Supervision Processes Annex 2. Beneficiary Survey Results Annex 4. Borrower s ICR Annex 5. Comments of Co-financiers and Other Partners/Stakeholders* Annex 6. List of Supporting Documents Annex 7. Map of Rwanda Annex 8. Budgeting for Effectiveness in Rwanda : from Reconstruction to Reform List of Tables Table 1. Outcome Indicators for Rwanda s First PRSC/G Series Table 2. Prior Actions for Disbursement and Other Key Achievements under the First PRSC/G Series Table 3. Overall Expenditure in Priority Sectors as a Proportion of Various Total Expenditures Table 4. Results Framework for Rwanda s First PRSC/G Series Table 5. Progress in Health Status Indicators: Comparison of DHS 2005 and DHS 2008 Table 6. Reaching the MDGs: Rwanda s Status as of 2007 Table 7. Analytical Underpinnings for the First PRSC/G Series Table 8. Allocation of Public Expenditures,

4 List of Figures Figures 1 and 2. Total Transfers to Districts, , of which Capitation and Performance-based Financing (PBF) Figure 3. Community Health Insurance Coverage (Mututelles), Figure 4. Decrease in Malaria Incidence and Malaria Deaths, Figure 5. Increase in Access to Water, Figure 6. Increase in Export of Goods, List of Boxes Box 1. Key Reforms Undertaken in Rwanda, Box 2. Summary of Beneficiaries Feedback of the first PRSC/G Series Box 3. Summary of GoR s Feedback on the First PRSC/G Series: Key Success Factors

5 A. Basic Information Program 1 Country: Rwanda Program Name: First Poverty Reduction Support Credit/Grant Program ID: P L/C/TF Number(s): IDA-39940, IDA-H1300 ICR Date: 06/30/2008 ICR Type: Core ICR Lending Instrument: DPL Borrower: Government of Rwanda Original Total Commitment: XDR 44.6M Disbursed Amount: XDR 44.6M Implementing Agency: Ministry of Finance and Economic Planning Cofinanciers and Other External Partners: African Development Bank, DFID, European Union, African Development Bank, SIDA (via budget support); Belgium, Germany, USAID, UNICEF, UNFPA (via sector investment/program approaches) Program 2 Country: Rwanda Program Name: Second Poverty Reduction Support Grant Program ID: P L/C/TF Number(s): IDA-H1890,TF ICR Date: 06/30/2008 ICR Type: Core ICR Lending Instrument: DPL Borrower: Government of Rwanda Original Total Commitment: XDR 37.6M Disbursed Amount: XDR 37.6M Implementing Agency: Ministry of Finance and Economic Planning Cofinanciers and Other External Partners: African Development Bank, DFID, European Union, African Development Bank, SIDA (via budget support); Belgium, Germany, USAID, UNICEF, UNFPA (via sector investment/program approaches) Program 3 Country: Rwanda Program Name: Third Poverty Reduction Support Grant Program ID: P L/C/TF Number(s): IDA-H2600 ICR Date: 06/30/2008 ICR Type: Core ICR Lending Instrument: DPL Borrower: Government of Rwanda Original Total Commitment: XDR 33.8M Disbursed Amount: XDR 33.8M Implementing Agency: Ministry of Finance and Economic Planning Cofinanciers and Other External Partners: African Development Bank, DFID, European Union, African Development Bank, SIDA (via budget support); Belgium, Germany, USAID, UNICEF, UNFPA (via sector investment/program approaches) B. Key Dates First Poverty Reduction Support Credit/Grant - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/29/2004 Effectiveness: 12/29/ /29/2004 Appraisal: 08/13/2004 Restructuring(s): Not Applicable Not Applicable Approval: 10/21/2004 Mid-term Review: 09/14/2006 Not Applicable Closing: 10/31/ /31/2005 Second Poverty Reduction Support Grant - P Process Date Process Original Date Revised / Actual Date(s) i

6 Concept Review: 05/09/2005 Effectiveness: 12/27/ /27/2005 Appraisal: 07/22/2005 Restructuring(s): Not Applicable Not Applicable Approval: 11/10/2005 Mid-term Review: 04/05/2008 Not Applicable Closing: 12/31/ /31/2006 Third Poverty Reduction Support Grant - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 06/06/2006 Effectiveness: 03/19/ /19/2007 Appraisal: 10/19/2006 Restructuring(s): Not Applicable Not Applicable Approval: 12/07/2006 Mid-term Review: 04/17/2007 Not Applicable Closing: 12/31/ /31/2007 C. Ratings Summary C.1 Performance Ratings for Overall Program (First, Second, and Third Poverty Reduction Support Credit/Grants) Outcome: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Highly Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (First, Second, and Third Poverty Reduction Support Credit/Grants) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Highly Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Performance: Satisfactory Overall Borrower Performance: Highly Satisfactory C.3 Quality at Entry and Implementation Performance Indicators First Poverty Reduction Support Credit/Grant QAG Assessments Implementation Performance Indicators Rating: (if any) Potential Problem Program at any No Quality at Entry (QEA): None time (Yes/No): Problem Program at any time Quality of Supervision No None (Yes/No): (QSA): DO rating before Highly Satisfactory Closing/Inactive status Second Poverty Reduction Support Grant - P Implementation Performance Indicators QAG Assessments (if any) Rating: Potential Problem Program at any No Quality at Entry (QEA): None time (Yes/No): Problem Program at any time (Yes/No): No Quality of Supervision (QSA): None ii

7 DO rating before Closing/Inactive status Satisfactory Third Poverty Reduction Support Grant - P Implementation Performance Indicators QAG Assessments (if any) Rating: Potential Problem Program at any No Quality at Entry (QEA) None time (Yes/No): Problem Program at any time Quality of Supervision No None (Yes/No): (QSA) DO rating before Highly Satisfactory Closing/Inactive status D. Sector and Theme Codes First Poverty Reduction Support Credit/Grant - P Original Actual Sector Code (as % of total Bank financing) General education sector General industry and trade sector General public administration sector General water, sanitation and flood protection sector Health Theme Code (Primary/Secondary) Education for all Primary Primary Health system performance Primary Primary Other human development Primary Primary Poverty strategy, analysis and monitoring Primary Primary Public expenditure, financial management and procurement Primary Primary Second Poverty Reduction Support Grant - P Original Actual Sector Code (as % of total Bank financing) Central government administration General energy sector General water, sanitation and flood protection sector Health Primary education Theme Code (Primary/Secondary) Poverty strategy, analysis and monitoring Primary Primary Decentralization Secondary Secondary Education for all Secondary Secondary Health system performance Secondary Secondary Other financial and private sector development Secondary Secondary iii

8 Third Poverty Reduction Strategy Grant - P Original Actual Sector Code (as % of total Bank financing) General education sector General energy sector General water, sanitation and flood protection sector Health Theme Code (Primary/Secondary) Public expenditure, financial management and procurement Primary Primary Education for all Secondary Secondary Health system performance Secondary Secondary Rural policies and institutions Secondary Secondary Rural services and infrastructure Secondary Secondary E. Bank Staff First Poverty Reduction Support Credit/Grant - P Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E. Madavo Country Director: Colin Bruce Emmanuel Mbi Sector Manager: Lynne D. Sherburne-Benz Laura Frigenti Task Team Leader: Agnes L. B. Soucat Agnes L. B. Soucat ICR Team Leader: Annika Kjellgren ICR Co-authors: Annika Kjellgren Allison Berg Second Poverty Reduction Support Grant - P Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Gobind T. Nankani Country Director: Colin Bruce Pedro Alba Sector Manager: Lynne D. Sherburne-Benz Laura Frigenti Task Team Leader: Agnes L. B. Soucat Agnes L. B. Soucat ICR Team Leader: Annika Kjellgren ICR Co-authors: Annika Kjellgren Allison Berg Third Poverty Reduction Support Grant - P Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Gobind T. Nankani Country Director: Colin Bruce Pedro Alba Sector Manager: Lynne D. Sherburne-Benz Laura Frigenti Task Team Leader: Agnes L. B. Soucat Agnes L. B. Soucat ICR Team Leader: Annika Kjellgren ICR Co-authors: Annika Kjellgren Allison Berg iv

9 F. Results Framework Analysis Program Development Objectives (from Program Document) The first Poverty Reduction Support Credit/Grant series (i.e., PRSC/G I, PRSG II, and PRSG III) was designed to help the Government of Rwanda (GoR) implement key policy actions outlined in its July 2002 Poverty Reduction Strategy Paper (PRSP), which focused on (a) creating a favorable private sector investment climate that would promote macroeconomic stability and sustained economic growth; (b) improving quality, coverage, and equity of basic service delivery through improved expenditure efficiency; and (c) supporting overall improvement of public expenditure management and governance, with an emphasis on transparency and accountability to citizens voice and participation. Revised Program Development Objectives (as approved by original approving authority) Not applicable. (a) PDO Indicators (for Overall Program) Baseline Value Original Target Values (at end of PRSC/G Series) Formally Revised Target Values PDO Indicator 1: % of children having completed primary school Value (quantitative or 33% 67% Not applicable 52% qualitative) Date achieved Comments (incl. % achievement) Actual Values Achieved at Completion Completion rates improved significantly by 57.5% although the ambitious original target value was not reached in the time period. That said, the PDO indicator does fully reflect the range of impressive achievements in the education sector under the PRSC/G series. Over the period, the primary net enrollment rate increased from 93% in 2004 to 96% in 2007 (according to 2007 Ministry of Education data), reflecting GoR s introduction of fee-free primary education at the beginning of the series. In conjunction with this policy, GoR introduced capitation grants to schools (to replace the loss in fee income), which was fully supported by the PRSC/G series. Introduction of capitation grants was one of the most successful programs implemented, particularly in the context of weak capacity. The capitation grants were smoothly transferred to schools, with amounts increasing each year from RwF300 per student in 2004, to RwF1,000 per student in 2005, to RwF2,500 per student in 2006, to RwFF5,300 per student in Capitation grants have had significant impact on the operation of schools, with schools reporting, for instance, a decrease in drop-out rates due to the funding, via capitation grants, of school meal programs; additional textbooks and equipment; and water and sanitation facilities (improving hygiene). In addition, because of PRSC/G support GoR felt confident in reallocating funds within the sector, with a much greater proportion of the budget going toward primary versus the traditionally favored tertiary sector over the course of the program. Immunization coverage PDO Indicator 2: Value (quantitative or 83% 95% Not applicable 98% Qualitative) Date achieved Comments Exceeded target, i.e., more than 100% achieved. (incl. % achievement) PDO Indicator 3: Number of days to open a business v

10 Value (quantitative or 40 Less than 20 Not applicable 16 Qualitative) Date achieved Comments (incl. % achievement) Exceeded target, i.e., more than 100% achievement. Rwanda was among the top 10 performers in the 2006 Doing Business report. PDO Indicator 4: Access to clean water and sanitation facilities Value (quantitative or Qualitative) 48% 55% Not applicable Date achieved Comments (incl. % achievement) Clean Water: 71%; Sanitation: 42% The clean water target was exceeded, i.e., more than 100% achieved. Note, however, that baseline and target values under this PDO were set under slightly different standards compared to the measures used in If using current standard measures, the original baseline/target values should be revised downward, indicating a more significant improvement in this sector than shown using original values as above. Using original baseline data, access to clean water improved by 48%, while access to sanitation (using 2004 UNICEF/WHO standards) was only available to an estimated 38% of the population in 2006 compared to 42% in Note that sanitation targets in the Government s current Economic Development Poverty Reduction Strategy are set at 45% by 2012, which is already close to being achieved. (b) Intermediate Outcome Indicators (for Overall Program) Baseline Value Original Actual Values Formally Revised Intermediate Achieved Target Values Outcome Indicator at Completion Indicator 1: Primary school completion rate Value (quantitative or 33% 67% Not applicable 52% qualitative) Date achieved Comments (incl. % achievement) As noted above, while much progress was achieved, this indicator did not advance as quickly as expected. However, as also noted, much has been achieved in the education sector under the PRSC/G series that is not reflected in the PDO and intermediate outcome indicators, with the most significant achievement being the successful transfer of capitation grants to schools. Immunization coverage Indicator 2: Value (quantitative or 83% 96% Not applicable 98% Qualitative) Date achieved Comments Exceeded target, i.e., more than 100% achieved. (incl. % achievement) Indicator 3: Number of days to open a business Value (quantitative or Not applicable 18 Qualitative) Date achieved Comments Exceeded target, i.e., more than 100% achieved. (incl. % achievement) Indicator 4: Access to clean water and sanitation facilities Value (quantitative or Qualitative) 48% 50% Not applicable 64% vi

11 Date achieved Comments (incl. % achievement) Baseline and target values under this PDO were set under slightly different standards compared to what is used in If using current standard measures, the original baseline/target values should be revised downward, indicating a more significant improvement in this sector than shown above using original values. For the intermediate outcome indicator, using original target values, access to water improved by 33% as of Under five mortality (per 1,000 births) Indicator 5: Value (quantitative or Not applicable 152 / 103 Qualitative) Date achieved / 2008 Comments (incl. % achievement) This indicator was more than 100% achieved data are not available. Using 2005 data, this indicator improved 23%, exceeding the target. Note that by 2008 this improved by another 32%, dropping from 152 in 2005 to 103 in 2008 (DHS 2008), further exceeding the target and indicating an overall improvement of 48% between 2003 and Indicator 6: Use of bed nets (children under 5) Value (quantitative or 4% 30% Not applicable 65% Qualitative) Date achieved Comments Exceeded target, i.e., more than 100% achieved. (incl. % achievement) Indicator 7: Transparent tariff setting mechanism in use for the energy sector Value (quantitative or Qualitative) Lack of clear transparent tariff setting mechanism for the energy sector Approval of revised Electrogaz tariffs and Electrogaz management contract indicators adjusted Passage of electricity and gas legislation including tariff reform Adoption by Cabinet of revised electricity tariff that balances protection of industrial consumers and cost recovery requirements Date achieved Comments (incl. % achievement) Indicative trigger for PRSG III in the PRSG II Program Document was revised to the actual value, which was 100% achieved. Indicator 8: Exports of goods and services to GDP ratio Value (quantitative or Not applicable 10.1 Qualitative) Date achieved Comments Exceeded target, i.e., more than 100% achieved. Improvement by 18%. (incl. % achievement) Indicator 9: MTEFs for key ministries (education, health, water, and energy) prepared annually and Value (quantitative or Qualitative) budget allocations reflect MTEFs MTEF introduced by MINECOFIN in 2000, but not all sectors regularly prepared MTEFs and linkage to budget allocations was extremely weak Progress in preparation of MTEFs for key ministries Not applicable National level MTEF and sector MTEFs for education, health, agriculture, water, and energy prepared; education MTEF and budget linkages most advanced; district MTEFs in place Date achieved Comments Significant progress was made in this area as all key sectors with the exception of energy vii

12 (incl. % achievement) Indicator 10: Value (quantitative or Qualitative) successfully introduced result-based MTEFs. Energy has an MTEF, but its linkage to results needs to be further strengthened. It is also worth noting that MTEFs have also been introduced at the district level with support of the PRSC/G series, showing a greater achievement under the MTEF indicator than was originally envisaged under the series. Public Procurement Law complying with best practices published in Official Gazette Outdated Procurement Code Public Procurement Law complying with international best practices published in Official Gazette Revised draft public Procurement Law consistent with international best practice submitted to Parliament Modern Procurement Law, in line with international best practice, published in the Official Gazette Date achieved April 2007 Comments (incl. % achievement) Indicator 11: Value (quantitative or Qualitative) Passage of the Procurement Law took longer than expected; originally programmed for submission to Parliament under PRSC/G I, it was made a condition of effectiveness for PRSG III, when it was finally 100% achieved. While the passage of the Law took longer than expected, important supporting activities including the production of standard bidding documents, guidelines and procedures for procurement, and capacity building procurement officers was ongoing with the support of the PRSC/G series in follow-up to the comprehensive Country Procurement Issues Paper undertaken to support the series. Citizen Report Cards results disseminated to the public and used in Poverty Reduction Strategy monitoring to assess user satisfaction with services Use of Citizen Report Citizen Report Cards Cards/ questionnaires and Community not yet adopted or Scorecards piloted for designed education and health Not applicable Date achieved / Comments (incl. % achievement) Citizen Report Cards adopted by GoR as instrument to monitor poverty reduction programs 100% achieved. Citizen Report Cards successfully piloted and adopted by GoR as a monitoring and evaluation instrument. G. Ratings of Program Performance in ISRs First Poverty Reduction Support Credit/Grant - P No. Date ISR Actual Disbursements DO IP Archived (USD millions) 1 12/07/2004 Satisfactory Satisfactory /23/2005 Highly Satisfactory Highly Satisfactory Second Poverty Reduction Support Grant - P Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 06/08/2006 Satisfactory Satisfactory Third Poverty Reduction Support Grant - P Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 04/24/2007 Highly Satisfactory Highly Satisfactory 50.0 H. Restructuring (if any) Not applicable. viii

13 1. Program Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., Program Document/ISR, not evaluative) 1.1 Context at Appraisal (brief summary of country macroeconomic and structural/sector background, rationale for Bank assistance) 1. The Government of Rwanda (GoR) had a strong track record of reform by late 2003 when the Bank began preparation of a first series of Poverty Reduction Support Credits/Grants (PRSC/G). From 1995 to 2003, the country moved from the ruins of genocide to the implementation of advanced macroeconomic management practices, public financial management reforms, and basic service delivery. Key reforms undertaken between 1995 and 2003 are described in Box Rwanda, a small, landlocked country in Sub-Saharan Africa with a population of approximately 8.2 million, had a per capita GNI of approximately US$230 in late Around 60 percent of the population was estimated to be poor, with around 85 percent of the population living in rural areas. Population density, at about 340 inhabitants per square kilometer, was (and remains) one of the highest in the world. The Rwandan economy, largely agrarian, was estimated in 2004 to have 41 percent of its GDP contributed from agriculture, 38 percent from services (wholesale and resale trade in various products, transportation, and public administration), and 21 percent from industry (with roughly half attributed to manufacturing and half to construction). 3. When the Bank first began preparing PRSC/G support, it had been about ten years since the 1994 genocide, in which approximately one million people were killed, three million people were driven into exile, over 100,000 people were put in prison, and thousands of people were handicapped physically and mentally. The genocide decimated Rwanda s fragile economic base, severely impoverished the population (particularly women), and eroded the country s ability to attract private sector investment. As a result of extensive economic and governance reform measures taken between 1995 and 2002, GDP growth rates averaged over 9.3 percent per annum. During reconstruction, financed largely by donors, the GoR focused on rebuilding institutions and improving social indicators, with health indicators reaching pre-genocide levels and net and gross enrollment at all levels surpassing pre-genocide rates and primary school enrollment of girls on par with that of boys. 4. Prior to the genocide, estimates showed that 46 to 48 percent of households were poor. 1 Poverty dramatically increased following the genocide, reaching 78 percent, including 82 percent in rural areas and 28 percent in urban areas. By 2000, the proportion of poor had declined to 64 percent. In 1999, a new definition of poverty was established and a new poverty line created from the National Poverty Assessments and Household Living Standards Survey (HLSS), establishing the headcount index at 60.3 percent below the poverty line, including 65.7 percent in rural areas and 14.3 percent in urban areas. In 2000, the Gini index ranged from roughly 0.32 in Kibuye and 1 Poverty estimates based on 1985 household data, which used projections consumption. In 1990, it was estimated that 48 percent of the population was poor (50 percent of the rural population and 19 percent of the urban population). 1

14 Gitarama (largely rural areas) to 0.43 in Cyangugu, Butare, and Kigali City (urban areas). Rwanda was facing serious difficulties to reach the Millennium Development Goals (MDGs). Access to safe sources of water in rural areas was low. Primary school participation rates were high, but the completion rate was low by international standards and Rwanda s repetition rate was among the highest in the world. High fertility rates combined with poor nutrition contributed to placing poor children and women at great risk of disability and early death. Estimates of under-five mortality and maternal mortality rates were among the highest in Sub-Saharan Africa. 5. GoR invested significantly in addressing the causes of genocide, including mainstreaming dialogue and creating institutions to promote national reconciliation and build social capital and local capacity for governance. Discussions on the country s peace and development challenges were carried out in the Village Urugwiro (traditional public meetings) beginning in 1998; consultations of the National Unity and Reconciliation Commission and in the context of preparation of the country s 2002 Poverty Reduction Strategy Paper (PRSP) also focused the national dialogue on unity, reconciliation, justice, security, and democratization. Resettlement and reintegration of genocide victims (including refugees and internally displaced persons), adjudication of the cases of genocide suspects, poverty reduction, and good governance were recognized as prerequisites for national reconciliation. 6. To foster citizens empowerment, the National Assembly adopted decentralization laws in late 2000 and early 2001, and elections for offices in new district administrations were held in March Decentralized entities came into being thereafter, and in May 2003 a new Constitution was approved in a national referendum. This paved the way for presidential and parliamentary elections in August and September 2003, respectively, which the international community judged as free and fair. 7. The stability of the Great Lakes region is key to Rwanda s economic and social progress and thus Rwanda was (and continues) playing a key role in the peace process. The Tripartite Plus One Commission, comprised of Rwanda, the Democratic Republic of Congo, and Uganda, with Burundi as an observer, had established an agreement on the prosecution of criminals and negative forces in the region. The Governments of Rwanda and the Democratic Republic of Congo, in cooperation with the United Nations Mission in the Democratic Republic of Congo at the time, were increasing pressure on the Forces Démocratiques de Liberation du Rwanda, the Rwandan rebel group in eastern Congo, to honor its commitment to end all military activities and return to Rwanda. 8. On the economic front, despite structural rigidities the country is landlocked, the quality of the road network and transportation is low, and there is limited availability or access to water and energy (which increases the cost of production) continued improvement in security after the genocide and strong government commitment to reforms led to strong economic growth (and relatively low inflation) until Driven by reconstruction efforts, the annual average growth rate between 1996 and 1998 was 11.4 percent and between 2000 and 2002 it was 8.1 percent. Through improved tax policy and administration, revenue performance reached 13.5 percent of GDP in 2003, up from 9.7 percent in

15 9. In 2003, GDP growth fell to 0.9 percent, while inflation rose to 7.4 percent (compared to 9.4 percent GDP growth and 2.0 percent inflation in 2002). The poor level of growth was mainly due to drought conditions during late 2002 and early 2003, which were exacerbated by falling international commodity prices for Rwanda s main exports (tea and coffee), increases in the price of petroleum, and unforeseen expenditures associated with the national elections. Despite these setbacks, by end-june 2003 policy performance under an IMF-supported Poverty Reduction Growth Facility (PRGF) was broadly satisfactory. During the June 2003 PRGF review, six quantitative performance criteria and all structural performance criteria were met. Three quantitative measures were narrowly missed because of weakened policy performance brought on by the above mentioned events. Progress was made in addressing the issues and, consequently, in June 2004 the second and third PRGF reviews were concluded and additional interim assistance under the HIPC Initiative was approved. (Rwanda reached its HIPC Completion Point in April 2005.) 10. Rwanda s Poverty Reduction Strategy Paper (PRSP) elaborated the GoR s vision for achieving the MDGs, including reducing poverty by half by It articulated a medium-term program ( ) as a first step toward the GoR s Vision 2020, which includes ambitious targets of increasing GDP per capita to US$900; reducing the number of poor people to 25 percent of the population; increasing life expectancy to 65 years (from 49 years); and increasing literacy to 90 percent of the population (from 48 percent). Development partners strongly supported Rwanda s PRSP process, and commended the GoR for the consultative manner through which it was developed. 11. The PRSP identified the private sector as the main engine of growth, with the transformation of agriculture and the rural economy as the leading source of growth in the near to medium term. To deal with the legacies of the genocide and structural impediments to economic transformation, the PRSP outlined five basic building blocks for economic growth and poverty reduction: (a) macroeconomic stability; (b) human development; (c) good governance; (d) partnership; and (e) the prioritization of public action. It also included six priority action areas: (a) rural development and agricultural transformation; (b) human development; (c) economic infrastructure; (d) good governance; (e) private sector development; and (f) institutional capacity building. The PRSP stressed the importance of defining sectoral strategies and associated mediumterm expenditure frameworks (MTEFs), which the Ministry of Finance and Economic Planning (MINECOFIN) had introduced in 2000, to guide public actions for implementation. Box 1. Key Reforms Undertaken in Rwanda, Public Financial Management Reform. Modernization of the country s fiduciary framework began in The Office of the Auditor General and the National Tender Board were established and the process of revising the laws, regulations, and guidelines governing public financial management was initiated. The GoR revived the Office of the Inspector-General of Finance and Audit, with responsibility for coordinating the internal audit of government agencies finances. The Office of the Inspector General for Public Finances was created to take the lead in the audit of budget transactions, and the Division of Government Accounts was created to prepare and publish regular accounts of government financial operations. Starting in 1999, the GoR introduced computerization of budget transactions and production of monthly reports on budget out-turns. The MTEF was initiated in 2000, and an upgraded expenditure monitoring system, in the form of a monthly flash report on actual and budgeted expenditures, was introduced in MTEF implementation was supported by a Public Expenditure Review and social sector expenditure reviews in 1999 and 2000, and reviews of the transport and agriculture sector in A 2001 Public Expenditure Tracking Survey concluded that the management of public funds was largely transparent with no systemic pattern of leakage 3

16 salaries were paid regularly and budgeted public funds reached rural schools and health centers, provided cash flow allowed it. A Public Expenditure Management Review was conducted in 2003 and a Financial Accountability Review and Action Plan was initiated. MINECOFIN s Central Projects and External Financing Bureau was established at end-1998 to monitor and improve coordination of donor funded projects. Following adoption of the PRSP, it coordinated budget support as well, and a special unit was created to monitor poverty outcomes in line with PRSP objectives and assure coherence between the budget and PRSP. Monetary Policy. A revised central bank statute giving the National Bank of Rwanda (NBR) independence in conducting monetary policy was adopted in mid Treasury bill auctions were introduced at end-1998, giving the NBR an indirect instrument for controlling monetary aggregates and influencing interest rates. A fully liberalized and market-determined exchange rate system was adopted, foreign exchange bureau were licensed, and current account restrictions were abolished. Agreements under Article VIII of the IMF s Articles of Agreement were accepted at end Fiscal Reform. The Rwanda Revenue Authority was established in late 1997 as a semi-autonomous agency for revenue collection. Fiscal measures, including an increase in the turnover tax to 15 percent in 1998, an increase in the excise tax, and subjecting public enterprises to income tax in 1999, were adopted. Value Added Tax was introduced in 2001, and the rate was increased from 15 percent to 18 percent in Collection of income taxes improved over despite the reduction of the corporate income tax rate from 40 percent to 35 percent. Trade Liberalization. The maximum tariff rate was reduced in three steps, from 100 percent before 1995 to 25 percent from early 1999, the number of non-zero tariff bands was reduced from 40 to 3, and export taxes and non-tariff barriers were completely eliminated. Price barriers were eliminated for all but a handful of commodities (cement, electricity, water, and telecommunications), and a flexible retail petroleum pricing mechanism was instituted. Rwanda joined the Common Market for Eastern and Southern Africa (COMESA) in 2003, eliminating import tariffs for goods from COMESA members. Privatization. The law providing the legal framework for the privatization of public enterprises was passed in Between 1996 and 1999, 25 enterprises were sold, 11 offered for sale, and five brought under liquidation; by 2003, 50 out of 70 public enterprises had been sold. The National Assembly adopted the Rwanda Investment Promotion Act and a new labor code was submitted to the National Assembly in In late 1999, an independent Private Sector Federation was established, paving the way for the abolition of the government-controlled Chamber of Commerce. Legislation for liberalization and regulation of the telecommunications sector was put in place in A multisectoral regulatory agency was established to manage licenses in telecommunications, water, and energy. The coffee sector was completely privatized and privatization of the tea sector was ongoing by Financial Sector Reform. A new banking law, promulgated in August 1999, provided for the effective, prudential regulation of commercial banks. Other regulations provided under the law were issued in 1999 and Comprehensive audits of all five commercial banks were carried out in 1999, providing the basis for these banks to be restructured to comply with the new prudential regulations. Civil Service Reform. A civil service census was carried out in late 1998 to provide the basis for civil service rationalization. Over 7,000 ghost workers and about 3,000 unqualified employees were removed, and the status of employees, largely returned refugee teachers, was regularized. In early 1999, fringe benefits were monetized, and civil service salaries, which had dropped by over one-half since 1993, were increased by over 40 percent on average. Decentralization. To foster citizens empowerment, the National Assembly adopted decentralization laws in late 2000 and early 2001, and new district administrations were elected in A Common Development Fund (CDF) was established in 2002 to channel grants to community-based development projects. Social Sectors. Budget allocations to the social sectors increased significantly in real terms from Social spending increased to 6.2 percent of GDP in 2003 from 3.9 percent in Expenditures to finance primary schools were higher, and enrollment of poor and rural children increased dramatically. Health facilities were largely rehabilitated and a decentralized health management system was adopted. Key health programs such as immunization were adequately funded and immunization coverage was one of the highest in Sub Saharan Africa. Essential drugs were available in clinics. Social Security System. The Caisse Sociale du Rwanda (CSR) was audited and an actuarial study carried out. A large part of the GoR s debt to the CSR was consolidated. 4

17 Gender. In November 1999, the GoR adopted a revised civil code, giving women the right to inherit and own property and reserving seats for women in the National Assembly, and elected local councils. Following the 2003 national elections, 40 percent of elected parliamentarians were women. A gender policy was adopted by Cabinet in 2003, and the Strategic Plan for the Ministry of Gender and Women in Development was finalized and adopted along with a related action plan, which included a Comprehensive Legal Action Plan to eliminate gender disparities. Demobilization. Almost 10,000 soldiers had been demobilized by the government in two rounds, at end-1997 and end In addition, about 15,000 ex-far (soldiers of the former government) had been incorporated into the national army since early Donor Harmonization. In November 2003, the GoR and budget support donors signed the Partnership Framework for Harmonization and Alignment of Budget Support, with the aim of improving donor coordination, decreasing overlap, and reducing transaction costs for the GoR. The Framework codified sector cluster groups, identifying a lead sector ministry/agency, along with a lead donor, to manage strategy preparation. The education sector was leading the sector-wide approach. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 12. The first series of PRSC/Gs (i.e., PRSC/G I, PRSG II, and PRSG III) was designed to help the GoR implement key policy actions outlined in its July 2002 PRSP, which focused on (a) creating a favorable private sector investment climate that would promote macroeconomic stability and sustained economic growth; (b) improving quality, coverage, and equity of basic service delivery through improved expenditure efficiency; and (c) supporting overall improvement of public expenditure management and governance, with an emphasis on transparency and accountability to citizens voice and participation. In line with this agenda, the objectives of each operation in the first series are indicated below. PRSC/G I. PRSC/G I s objectives were to support the GoR s efforts to (a) stabilize the macroeconomic framework and advance the privatization program; (b) develop a resultoriented MTEF approach to budgeting, including the development of sectoral MTEFs, particularly in education, health, water, and energy, and pilot performance-based contracting agreements for provision of services in these sectors; and (c) strengthen governance and transparency, particularly through an improved fiduciary framework and establishment of the Office of the Ombudsman, along with associated election of local mediators. PRSG II. Building on the objectives of PRSC/GI, PRSG II continued and deepened support to the GoR as it implemented the next steps in its reform program. PRSG II s objectives included helping the GoR in (a) maintaining a stable macroeconomic framework, creating a strong basis for private sector-led economic growth, driven by agricultural transformation, promotion of exports, and deepening of the financial sector; (b) strengthening the results orientation of its MTEF and associated sectoral MTEFs, particularly in education, health, water, and energy, strengthening the linkages between MTEF priorities and the budget, and expanding performance-based contracting of services; and (c) continued strengthening of governance and transparency, particularly through further improvements to the fiduciary framework and empowerment of local communities. At the GoR s request, given important linkages to the growth agenda, including agricultural transformation and export promotion, policy dialogue in the transport sector was added. 5

18 PRSG III. Building on achievements under PRSC/G I and PRSG II, PRSG III continued support to the GoR as it implemented its reform program which, with the effectiveness of a territorial reform law in January 2006, was being undertaken in the environment of enhanced decentralization. Within this context, PRSG III s objectives included to help the GoR (a) build on the successes with decentralized service delivery, particularly in education, health, water, and energy; (b) maintain a stable macroeconomic framework, creating the basis for private sector-led economic growth, driven by agricultural transformation, export promotion, financial sector deepening, and information communications technology (ICT), which was expected to be a main focus of the GoR s second PRSP; (c) strengthen further the linkages between strategic planning, its MTEF, and budgeting, with a particular focus on the service delivery sectors; and (d) continue to improve governance and transparency through further reforms to the fiduciary framework and empowerment of local communities. Policy dialogue in the transport sector was to continue while, at the GoR s request, dialogue on social protection was added. Key outcome indicators for the first PRSC/G series are shown in Table 1. Table 1. Outcome Indicators for Rwanda s First PRSC/G Series Outcome Indicator Baseline* Objective at End of Actual Value at End PRSC/G Series of PRSC/G Series Number of days to open a business 40 days (2003) Less than 20 days 16 Exports of goods and services to GDP ratio 8.3% 12% 10.1% % children having completed primary school 33% 67% 52% Under five mortality Immunization coverage 83% 95% 98% Use of bed nets (children under 5) 20% 60% 65% Access to clean water and sanitation facilities 48% 55% 71% clean water; 42% sanitation *Showing original baseline values; most recent year Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification: 13. As indicated above, each subsequent operation built on the one before, evolving in line with the natural evolution of the GoR s reform program. However, the main goal of supporting the GoR to implement its PRSP, the objectives supported, and key program indicators remained relevant over the course of the PRSC/G series. 1.4 Original Policy Areas Supported by the Program (as approved) 14. The three main policy areas supported by the first PRSC/G series included (a) improving service delivery for the poor, with a focus on education, health, water, and energy (with policy dialogue on transport and social protection added under PRSG II and III, respectively); (b) private sector-led growth and agriculture transformation for poverty reduction; and (c) public sector underpinnings for improved service delivery, including public expenditure management, transparency and accountability, and monitoring and evaluation. Following is a brief summary of those three main policy areas (further details are provided in Section 3). 6

19 Area 1: Improving Service Delivery for the Poor Education, Health, Water, and Energy; Transport and Social Protection 15. Under this area, the PRSC/Gs supported the GoR s service delivery agenda, with a focus on the four key sectors of education, health, water, and energy. With PRSC/G support, the GoR was able to implement innovative approaches to decentralized service delivery, beginning with education and health under PRSC/G I, and moving from dialogue to actions on water and energy under the subsequent operations. In education and health, this included performance-based contracting at the local level via capitation grants to schools and a basic package of health services at community health centers; in water, this included engaging local-level private operators. Shifting priorities in energy due to low-lake levels for hydro-generation led to a focus on the urgent need for generation capacity. At the GoR s request, policy dialogue on transport was added under PRSG II and social protection under PRSG III. Area 2: Private Sector-led Growth and Agriculture Transformation for Poverty Reduction 16. Support under the PRS/G series in this area was aligned with the GoR s strategy for growth, which was built on two key drivers: private sector development; and agricultural transformation. GoR s strategy included increasing agricultural productivity and diversifying the economy through export promotion, increased trade, expansion of tourism, improvements in the banking/financial sector, and introduction of information communications technology. Area 3: Public Sector Underpinnings for Improved Service Delivery Public Expenditure Management, Transparency and Accountability, and Monitoring and Evaluation 17. Throughout the PRSC/G series, GoR placed a high priority on the enhancement of its public financial management system in order to address weaknesses and improve the transparency and accountability of government. With PRSC/G support, the GoR focused on strengthening the linkages between strategic planning, the MTEF, and budgeting, which became even more critical in the context of fiscal decentralization in Establishing the legal and regulatory framework for financial management and procurement, which did not exist at the outset of the PRSC/G series, and beginning to build human resource capacity in accounting and auditing, were critical achievements under the series. While monitoring and evaluation progressed under the PRSC/G series, it remains an area in need of further attention. 1.5 Revised Policy Areas (if applicable) 18. As stated above, the policy areas supported under the first PRSC/G series evolved over time in accordance with accelerated decentralization and adjustments of the GoR s reform program over three years of implementation. However, the three main policy areas supported under the first PRSC/G series remained relevant throughout the duration of the program and were not revised. 1.6 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) 7

20 19. There were no significant changes in design, scope, scale, or implementation arrangements. Regarding funding, the first operation under the series, approved before the country reached its HIPC Completion Point, was a mix of credit (US$15 million) and grant (US$50 million). The second operation followed HIPC Completion and thus was completely grant-funded (US$55 million) so as not to reverse the effects of the debt relief. The third operation, which followed the approval of further debt relief under the Multilateral Debt Relief Initiative, was also fully grantfunded (US$50 million). Regarding schedule, PRSG III disbursed later than the two other operations primarily due to an agreement amongst budget support donors (with strong encouragement by GoR) to follow the World Bank s lead on disbursements, preferably before the start of, or early in, the calendar year (which is equivalent to GoR s fiscal year). As such, the World Bank decided to align its disbursement with other donors for the first part of This also followed the fact that the Procurement Law trigger, revised under the first two PRSC/Gs, was made a condition of effectiveness for PRSG III. However, key to the later disbursement of PRSG III was the agreement to align donor disbursements. 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance (supported by a table derived from a policy matrix) 20. Overall, performance under the first PRSC/G series far exceeded expectations, particularly in the area of decentralized service delivery. Achievements in the transfer of capitation grants to schools, performance based contracting with community health centers and the scale-up of mutuelles (local health insurance schemes), and rural water access all progressed beyond what was envisaged. GoR was able to implement innovative approaches to service delivery and, uniquely in Sub-Saharan Africa, was able to scale-up successfully. For instance, the amount of the capitation grants transferred to schools increased almost 18 fold over four years (from RwF300 per student in 2004 to RwF 5,300 per student in 2007); successful pilot performance-based contracts with community health centers were rolled out country-wide (whereas the expectation had been that the program would remain in the pilot stage under the first PRSC/G series); and local-level private operator schemes for rural water systems were expanded far beyond what had been planned. Though priority areas in energy shifted due to the electricity generation crisis, solutions were found through dialogue and the PRSC/G series was flexible enough to adapt, demonstrating that critical aspects of infrastructure can be addressed successfully under PRSC/Gs. When the GoR decentralized budget execution as part of its ambitious decentralization agenda, transferring responsibility from central to district administrations, service delivery was not interrupted. 21. Under the area of private sector-led growth, export promotion excelled. Once GoR developed its export promotion strategy it moved quickly to implement it, yielding results in just one year s time. In addition, the PRSC/G series supported a turn-around in the agriculture sector, based on GoR s Strategic Plan for Agricultural Transformation (PSTA). GoR s commitment to public financial management reforms was unwavering and steady progress was made in this area based on well coordinated, regular policy dialogue between GoR and donor partners, led in large part by the Bank. The one area in which less than exceptional progress was made was in regard to procurement where, in contrast to public financial management, the dialogue was not as well coordinated, leading to misunderstandings between GoR and the Bank and resulting in delays. While key political actions had been taken before the start of the PRSC/G series (e.g., approval of 8

21 a new Constitution, free and fair elections), enhancing voice and accountability not just through political actions was of utmost importance to GoR. Thus, accountability in regard to service delivery, for instance through the use of Community Scorecards (CSCs) and Citizen Report Cards (CRCs), combined with decentralization, became important tools. Given the flexibility of the PRSC/G instrument, the program evolved in line with achievements, allowing for the inclusion of dialogue on additional sectors, such as transportation and social protection under PRSG II and PRSG III, respectively, and further support on agriculture and ICT. 22. As discussed in further detail in Section 3, the first PRSC/G series in Rwanda supported a broad program of reforms, reflective of the ambitious and committed nature of GoR. While broad, the reform program was far from shallow; in fact, a rich, in-depth policy dialogue between GoR and the Bank was pursued in each area, guided by an overall strategic focus on allocation of public expenditures (Annex 8 provides an in-depth analysis of public expenditures over the period of the first PRSC/G series). Prior actions under the series while numerous, ambitious, and reflective of critical reforms being pursued were not able to fully capture the breadth and depth of the policy dialogue supported by the PRSC/G series. As such, in many cases prior actions focused on the overarching legal framework, particularly given that Rwanda, emerging from post-conflict reconstruction into development, lacked such a framework at the start of the PRSC/G series. The prior actions were used as conditions of disbursement, but achievements in each of the policy areas supported by the PRSC/G series were much more extensive and reflected a trusting and collaborative dialogue between GoR and the Bank beyond what is evident by merely evaluating achievement of prior actions or PDO and intermediate outcome indicators. 23. Based on the PRSC/G policy matrices, Table 2 reflects the prior actions under the first PRSC/G series and provides a summary of their achievement as well as other key policy achievements in each area (quantitative achievements are summarized in the indicators tables at the beginning of the ICR and in other tables in the document). Recognizing that causality/direct attribution of achievements as a result of PRSC/G series support is in many cases difficult to establish, the achievements over the time period of the first PRSC/G series are nonetheless impressive. Table 2. Prior Actions for Disbursement and Other Key Achievements under the First PRSC/G Series PRSP AREA/ OBJECTIVE PRSC/G I PRIOR ACTIONS KEY ACHIEVEMENTS UNDER PRSC/G I Private Sectorled Growth Improve Access of the Population to Basic Education of Acceptable Quality Pfunda Tea Factory CNPE Kabuye brought to the point of sale to qualified buyers. Complete document on a fiscally sustainable sector strategy that indicates GoR s preferred scenario for achieving Universal Primary Completion. Agree how the 2005 Budget and MTEF will reflect this decision. (Completed document containing decision and process.) Prior actions achieved as planned. In addition, the Investment Code was revised to align with revised tax code; a Commercial Chamber was established; a National Agricultural Policy and Sector Strategic Plan (PSTA) were developed; and premium pricing of tea leaves for producers was introduced. Prior action achieved as planned. In addition, an Organic Education Law was adopted (2003); the Education Sector Strategic Plan (ESSP ) and sector MTEF was developed; capitation grants in the amount of RwF300 per student were transferred to schools as part of GoR s new fee-free primary education policy; and District Education Funds to support particularly needy students were adopted. Improve the Carry out performance based Prior action achieved as planned. In addition, the Health 9

22 Performance of Health Services Improve Public Expenditure Management Improve Transparency and Accountability Improve Monitoring and Evaluation PRSP AREA/ OBJECTIVE Private Sectorled Growth Improve Population Access to Basic Education of Acceptable Quality Improve the Performance of Health Services payment schemes for high impact services in Butare and Cyangugu with donor funding; make provisions for transferring at least 50% of the cost to 2005 budget; increase DPT3 coverage to 80%. Maintain adequate macroeconomic framework Budget Framework Paper available, consistent with macroframework, medium term expenditures framework and PRSP priorities; and detailed output oriented medium term expenditures frameworks for education and health budget execution report submitted to Auditor General and presented to Parliament. Organic Budget Law adopted by Cabinet and submitted to Parliament. Public Procurement Law and recommendations of the Country Procurement Issue Paper (CPIP) are adopted by Cabinet and submitted to Parliament. Law establishing the Ombudsman office is published in the official Gazette and mediators elected in all cellules and sectors. PRSP Progress Report (APR) reviewing 2 nd year of PRSP implementation completed. Draft questionnaires of citizen report cards survey available. PRSG II PRIOR ACTIONS Good faith negotiations reached for the privatization of Rwandatel, Rwandex and Nshili- Kivu tea plantation and initiate privatization process of rice factories of Rwamagana, Gikonko and Bugarama. MTEF ceilings and 2006 Budget Framework Paper are consistent with the sector financing strategy; present official government draft budget document to all stakeholders in September Carry out a comparative review of the two pilot schemes and ensure 2006 budget covers at least 75% of their cost. Sector Strategic Plan and MTEF were developed; performance-based contracting approach for high-impact health services was piloted; mutuelles (local health insurance schemes) were scaled-up; the list of essential drug prices supplied by the drug purchasing agency was published; and policy and prices for anti-retroviral therapy were elaborated. Prior actions achieved as planned. In addition, the Accountant General and the Auditor General were appointed; the SMARTGOV budget system was adopted; and a full set of accounts for 2003 was completed and submitted to the Auditor General. Prior actions achieved as planned. In addition, the Gacaca process (community-based tribunals for genocide suspects) under way; National Decentralization Steering Committee and National Decentralization Implementation Secretariat operational; strategic plan to combat corruption elaborated; and media further liberalized. Prior actions achieved as planned. In addition, Sector Issues Papers and MTEFs for key sectors were produced. KEY ACHIEVEMENTS UNDER PRSG II Prior action achieved with adjustments to the program: Sopratel (hotel), Rwandex (coffee exports), and rice added to the privatization program (GoR decided to redesign the privatization program for the tea sector, which was previewed as the trigger in PRSC/G I Program Document, to make it more effective). In addition, an Export Promotion Strategy was developed; the Rwanda Investment and Export Promotion Agency was established; the Land Law was published in the Official Gazette; the agriculture sector MTEF was aligned with the PSTA; and a regulatory framework for microfinance was adopted. Prior action achieved as planned (trigger from PRSC/G I Program Document re-worded to include revised timing). In addition, capitation grants to schools continued, increasing to RwF1,000 per student; a Higher Education Law was also adopted with the aim of decreasing the high unit cost of tertiary education on the government s budget. Prior action achieved as planned. In addition, performancebased contracts with community health centers were scaledup to two additional areas (Kigali Ngali province and Kabgayi District) ahead of schedule; additional doctors and investment in equipment and infrastructure at 10

23 Improve Water Sector Performance Improve Energy Sector the Performance Improve Public Expenditure Management Improve Transparency and Accountability MINITERE/DEA has developed guidelines to assist districts in contracting private operators for managing new or rehabilitated systems; management contracts have been signed in at least 1 district in each of 4 pilot provinces Approval by RURA (Rwanda Utilities Regulation Agency) of revised Electrogaz tariffs and Electrogaz Management Contract performance indicators adjusted. Maintain adequate macroeconomic framework. Submitted draft 2006 budget law to cabinet, consistent with macroframework, detailed and output-oriented medium term expenditure frameworks for education, health, water, and energy, and PRSP priorities 2004 budget execution report submitted to Auditor General and presented to Parliament. Organic Budget Law adopted by Lower Chamber; Office of the Accountant General established; and study commissioned to determine ways of supporting its operationalization; Government commissions Capacity Needs Assessment for accountants and internal auditors in Government. community health centers were made; utilization of health services, including contraceptive prevalence, assisted deliveries, and outpatient services, increased. Prior action achieved as planned (trigger from PRSC/G I Program Document re-worded for clarification). In addition, a sector working group was established and a water policy was drafted. Prior action achieved as planned. Tariff rate increased from RwF42 to RwF81, and then to RwF112. Prior action achieved as planned. Prior action achieved as planned (trigger from PRSC/G I Program Document re-worded for clarification). Prior action achieved as planned (trigger from PRSC/G I Program Document re-worded for clarification). In addition, Ministerial accounts were converted to zero balance in move to Single Treasury Account and a Treasury Management Committee was established. Prior action achieved trigger as previewed in PRSC/G I Program Document was, Organic Budget Law published in Official Gazette; finalize, adopt and publish Financial Instructions; draft manual of financial management procedures prepared. However, in reviewing the Organic Budget Law for passage, Parliament discovered a contradiction with the English version of the Constitution. Thus, the trigger was revised to allow Parliament the time to seek a Constitutional amendment to allow for passage of the law. Passage and publication of the law and accompanying Financial Instructions would follow. Once the law and instructions were promulgated, the GoR would prepare the manual of financial management procedures, which was dependent on the substance of the law. 11

24 Improve Monitoring and Evaluation PRSP AREA/ OBJECTIVE Private Sectorled Growth Improve Population Access to Basic Education of Acceptable Quality Revised draft public procurement law submitted to Parliament establishing a new independent regulatory body, notably with responsibility for: (a) provision of advice to contracting entities; (b) preparation of amendments to the legislative and regulatory framework and implementing regulations for public procurement; and (c) provision of implementation tools and documents to support training and capacity building of implementation staff. All consistent with international best practice, specifically the OECD Development Assistance Committee and COMESA public procurement guidelines. Publication of the Ombudsman office action plan. Produce APR on 3 rd year of implementation. Publish pilot citizen report card surveys on identity cards and health and education services. PRSG III PRIOR ACTIONS Adoption of microfinance action plan and RARDA, RADA are at least 25% staffed and operational. MTEF ceilings and 2007 Budget are consistent with the sector financing strategy; present official government draft budget document to all stakeholders in September Prior action achieved trigger as previewed in PRSC/G I Program Document was, Public Procurement Law complying with best practices published in the Official Gazette. However, Parliament conducted an in depth discussion of the Public Procurement Law, which took longer than expected. For expediency, the GoR submitted a complementary draft law on the regulatory framework to be discussed in conjunction with the Public Procurement Law. It was understood that the passage of both laws would be the basis for Rwanda s modern Procurement Code. Prior action achieved as planned. The Gacaca process also continued. Prior action achieved GoR, in consultation with stakeholders, produced its draft APR and shared it with donor partners. With advancement of PRSG preparation, publication and dissemination followed PRSG approval. In addition, GoR took the lead in biannual Joint Budget Support Reviews originally introduced by the PRSC/G lead, which significantly improved budget support collaboration and harmonization and reduced transaction costs. Prior action achieved modified to reflect GoR s piloting approach to M&E, to ensure proper capacity building and institutionalization of the citizen report card process (MINECOFIN reorganized to better handle M&E). In addition, monitoring indicators were under development at the decentralized level. KEY ACHIEVEMENTS UNDER PRSG III Prior action achieved, but trigger previewed in PRSG II Program Document, Good faith negotiations reached for Gisakura, Kitabi, Mata, Shagasha tea factories and Scierie de Wisumo and privatization process of Gisovu, Nyabihu, Rubaya, Muindi tea factories, was replaced. Privatization of the Nshili kivu, Nyabihu and Rubaya factories was completed; the remaining 6 factories were under rehabilitation and restructuring to ensure that a reasonable strategy was developed to enable credible strategic partners to participate in their privatization. Given this change in strategy by the GoR, the focus of the PRSG III prior action became microfinance and reforms in the agriculture sector in light of the importance of these two areas to growth. Prior action achieved, although delayed by two months (the financing strategy was revised and a proposal was submitted to the Fast Track Initiative Secretariat). In addition, capitation grants continued to be transferred to schools, increasing to RwF2,500 per student; in follow-up to the Higher Education Law, the National Council for Higher Education and the Student Financing Agency of Rwanda 12

25 Improve the Performance of Health Services Improve Water Sector Performance Improve Energy Sector the Performance Improve Public Expenditure Management Improve Transparency and Accountability Improve Monitoring and Evaluation Implement recommendations of comparative review of performance based schemes for health centers and expand scale up to at least 3 regions with government funding. 10% of rural water supply systems are managed by local private operators. Adoption by Cabinet of revised electricity tariff that balances protection of industrial consumers and cost recovery requirements. Maintain adequate macroeconomic framework. Submit draft 2007 budget law to cabinet, consistent with macroframework, detailed and outputoriented medium term expenditure frameworks for education, health, water, and energy, and PRSP priorities budget execution report submitted to Auditor General and presented to Parliament. Finalize, adopt and publish Financial Policies and Procedures Manuals. Public Procurement Code complying with best practices adopted by Parliament. The Office of the Ombudsman reviewed by sampling at least 15% of the declaration of assets for public sector staff. Produce, publish and disseminate the 2005 PRS report budget includes funding for Citizen Report Card program to be conducted in each of the 30 districts. were created to reduce the costs of subsidized overseas tertiary studies; and the Long-term Strategy and Financing Framework for education was developed. Prior action achieved and exceeded performance based schemes were expanded to all 12 previous provinces (consolidated into four regions per territorial reform). Prior action achieved and exceeded. Prior action achieved, but trigger previewed in PRSG II Program Document, Passage of electricity and gas legislation including tariff reform, was revised to reflect delayed timing of the reform. To address the energy crisis, additional diesel generation capacity was also added. Prior action achieved as planned. Prior action achieved as planned. In addition, the Organic Law on State Finance and Property was adopted and the Rwanda Expertise Scheme was implemented (over 200 accountants/auditors hired and trained for government positions, particularly at decentralized levels). MINECOFIN also established an Intergovernmental Fiscal Relations Unit and proposed budget reforms, including alignment of district MTEFs to that of the national budget. GoR held a major budget reform workshop with all districts in 2007 to ensure ownership of the proposed budget reforms (supported by the PRSC/G). In addition, by 2007 GoR had completed several PERs in key sectors and held a PER workshop (with support from the PRSC/G) for all line ministries committing itself to fully institutionalizing PERs into its annual budget cycle. Prior action achieved as planned. Prior action achieved as planned. Adoption of the Procurement Code had been significantly delayed at the level of Parliament. This prior action was made into a condition of effectiveness. Prior action achieved as planned. Prior action achieved as planned. Prior action achieved trigger previewed in PRSG II Program Document, Conduct follow-up survey of Citizen Report Cards, was revised to reflect the GoR s decision to adopt the Citizen Report Card as the monitoring instrument for programs implemented under the PRSP. In addition, evaluations and log frames undertaken for EDPRS preparation. 13

26 2.2 Major Factors Affecting Implementation 24. The most significant factor affecting implementation was GoR s decision to enhance decentralization. While the PRSC/G series had been supporting decentralized service delivery, in 2006 GoR implemented both a major territorial reform (reducing the number of provinces from 13 to five, the number of districts from 106 to 30, and the number of secteurs from 1,545 to 416) and a major push on fiscal decentralization. While fiscal decentralization from the central to local levels had been happening in selected areas, full-fledged fiscal decentralization saw the transfer of 30 percent of budget resources to districts, along with associated implementation and reporting responsibilities. Fiscal decentralization was implemented together with performance-based budgeting using an innovative performance contract known as IMIHIGO between mayors and the President of the Republic to govern formula-based inter-governmental transfers. Fiscal decentralization was designed on the basis of the service delivery policy published in 2005, which emphasized accountability to service users. Block grants were designed both on the basis of needs (non-earmarked based on population and poverty) and performance (specific purpose grants based on results in education, health, and water). As part of decentralization, a large proportion of the central civil service was moved to the district level and significant efforts were invested in improving districts capacity. This, coupled with GoR s ongoing civil service reform program, created strains on limited human resource and implementation capacity at the central and district levels. To GoR s credit, this push toward enhanced decentralization was carried out without significant disruption (as has been the case in other countries) in services. Enhancing districts reporting and implementation capacity is now the key area of focus and is to be taken up under the next PRSG series, to build on the successful increases in transfers to districts (including capitation grants and performance based financing of health services). Figures 1 and 2 illustrate the increases in transfers to the districts between 2004 and Figures 1 and 2. Total Transfers to Districts, , of which Capitation and Performance-based Financing (PBF) in million RwFr in million RwFr Total transfers to Districts capitation grants PBF 25. Droughts experienced over the period of the PRSC/G series affected agriculture production and contributed to an energy crisis since much of the country s electricity generation is from hydro power. These factors affected GoR s poverty reduction agenda since both areas were key to growth. Food security and electricity generation (a key input for private sector development/investment) remained issues over the PRSC/G series, although the World Food Program helped GoR address the former and support under the PRSC/G series helped address the latter. In addition, though the HLSS undertaken in (EICV II) shows that at the national level the proportion of the Rwandan population identified as poor fell from 60.4 percent in

27 2001 to 56.9 percent in , population growth over the period was an average of around 2.7 percent per annum 2. Therefore, though the percentage of the population classified as poor has fallen, due to population growth, the total number of Rwandans living in poverty is estimated to have increased from around 4.8 million in to 5.4 million in While spending on human development sectors (education, health), infrastructure (energy), and land and resources (water and sanitation) increased in nominal terms over the PRSC/G period due to GDP growth, increased domestic resources through consistent increases in the tax base and increases in external aid, the percentage of the budget allocated to health and education did not increase in any significant way as a proportion of GDP, total public expenditure, or total resources although infrastructure and land and resources saw some proportional increases. Further details are illustrated in Table 3. Table 3. Overall Expenditures in Priority Sectors as a Proportion of Various Total Expenditures PRIORITY SECTORS OVERVIEW OVERALL EXPENDITURES * (Actuals) AS % of GDP & Resources & Expend HEALTH Expenditures** 18,280 29,471 62,319 46,465 as % of GDP 2% 2% 4% 3% as % of Total Expenditures** 6% 8% 14% 8% as % of Total Resources 6% 8% 17% 10% as % of Domestic Resources 13% 18% 31% 20% as % of External Resources 10% 14% 37% 22% EDUCATION Expenditures** 39,163 55,432 67,328 69,474 as % of GDP 3% 4% 4% 4% as % of Total Expenditures** 14% 15% 16% 12% as % of Total Resources 12% 15% 18% 16% as % of Domestic Resources 28% 33% 33% 29% as % of External Resources 22% 26% 40% 34% AGRICULTURE Expenditures** 11,055 16,739 18,142 35,909 as % of GDP 1% 1% 1% 2% as % of Total Expenditures** 4% 5% 4% 6% as % of Total Resources 3% 4% 5% 8% as % of Domestic Resources 8% 10% 9% 15% as % of External Resources 6% 8% 11% 17% INFRASTRUCTURE Expenditures** 27,771 49,491 41,151 97,529 as % of GDP 2% 4% 3% 5% as % of Total Expenditures** 10% 14% 9% 17% as % of Total Resources 9% 13% 11% 22% as % of Domestic Resources 20% 30% 20% 41% as % of External Resources 15% 23% 24% 47% LAND & RESOURCES Expenditures** 4,608 14,324 21,289 37,833 as % of GDP 0% 1% 1% 2% as % of Total Expenditures** 2% 4% 5% 7% as % of Total Resources 1% 4% 6% 8% as % of Domestic Resources 3% 9% 10% 16% as % of External Resources 3% 7% 13% 18% *Shown in Nominal Terms **Includes both Recurrent (Ministry Level & District/Province Level) & Development Expenditures 2 2 Per GoR s own 2007 estimates. WHO 2006 estimates of 2.8% annual population growth. 15

28 26. The PRSC/G series was also undertaken in the context of the Rome and Paris Declarations on aid harmonization. PRSC/G I was prepared under the November 2003 Partnership Framework signed by GoR and its budget support donors at the time. In 2004, GoR and budget support donors agreed on a common assessment framework for public financial management; a harmonization calendar was also elaborated, providing the timeline for key reviews and identifying periods when donors agree not to hold missions in order to minimize the burden on government. Preparation of PRSG II built on the principles outlined in this Partnership Framework: improving alignment with the GoR s PRSP and budget cycles, strengthening donor coordination, decreasing overlap and duplication, and reducing transaction costs for GoR in dealing with donors and managing development assistance. The overarching donor coordination body in Rwanda is the Development Partners Coordination Group, which meets monthly and is co-chaired by the GoR and United Nations Resident Coordinator. The Budget Support Harmonization Group, established under the Partnership Framework, is now an institutionalized mechanism for dialogue between the GoR and budget support donors. GoR progressively took the lead on donor coordination and by PRSG III was fully in control of organizing and preparing for joint reviews. Driven by GoR s PRSP cycle, during the course of PRSC/G preparation and implementation, three main reviews were instituted (as outlined and agreed in the Partnership Framework). These are: Joint Budget Review. There are two reviews: one in April takes place once the budget execution report for the previous year is available; another in September takes place once the GoR s draft Budget Framework Paper for the coming fiscal year is available. The April review is backward looking, focusing on progress against plans and targets for the previous year. The September review discusses planned sectoral and sub-sectoral budget allocations and expenditures at the national and district levels, in view of the links to the PRSP agenda for growth, poverty reduction, and human development outcomes. Joint Public Financial Management Review. The public financial management review focuses on GoR s progress on its public financial management reform program, which is the core o f donors budget support programs, and priority actions for the coming year as well as goals for the medium-term. This review is undertaken during the Joint Budget Review. Sector Reviews. Sector cluster groups (first established in 2002 as an implementation mechanism for the PRSP) lead sector reviews, aligning the timing of such reviews with the PRSP and budget cycles. Each major sector has a cluster around which input from relevant government agencies, donors, and other stakeholders is organized. A lead government agency and lead donor coordinate the cluster s activities. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 27. MINECOFIN was responsible for implementing the PRSC/Gs and for coordinating the completion of actions. MINECOFIN s Development Planning Unit is responsible for overall monitoring of the GoR s poverty reduction programs and the Bank worked closely with the unit and with GoR in general on monitoring and evaluation of the PRSC/G program. 28. Under GoR s first PRSP, several surveys were undertaken at the household and firm/industry level, which has enabled the estimation of outcomes and trends in key indicators. 16

29 For example, there are the two household consumption surveys (EICV 2001 and EICV 2005); a second Demographic Health Survey (DHS) was completed in 2005 to complement the one completed in 2003, and a third DHS has just been completed in 2008; in addition, rigorous impact evaluation of performance-based contracting in the health sector is underway; CRCs have also been part of the monitoring instruments of the PRSP; and the Ubudehe process is used to implement participatory assessment of community-level projects. In addition, surveys of the manufacturing and industry sectors as well as the informal sectors have been completed. All these recent surveys will facilitate the establishment of baseline information to evaluate the Economic Development and Poverty Reduction Strategy (EDPRS), GoR s second PRSP. There have also been institutional reforms to promote greater coordination between statistics and planning. The recent creation of the National Institute of Statistics, by merging the former Statistics and Census department, and expansion of the mandate of MINECOFIN s Strategic Planning Unit to include strategic planning (as opposed to strictly monitoring of the PRSP), will help improve overall monitoring and evaluation efforts. 29. MINECOFIN s Budget Monitoring and Reporting Team, responsible for ensuring that component sector spending plans developed with PRSC/G support were incorporated into the national MTEF and subsequent budget was also key to tracking progress on the implementation of the PRSC/Gs. The overarching results framework as designed for the first PRSC/G series is shown in Table 4 (actual results are shown in Section F at the beginning of the ICR). Table 4. Results Framework for Rwanda s First PRSC/G Series Area Supported by PDO/Outcome Expected Outcomes PRSC/G Indicators Series Education Health Water Energy Private Sector Development and Growth Public Financial Management Transparency and Accountability Increased primary completion Child mortality reduced Increased number of people with sustainable access to safe drinking water and basic sanitation Well-regulated sector (as a foundation for further achievements) Export-led development Increased foreign direct investment Strategic budgeting Transparent public procurement system in place and adequately % of children having completed primary school Baseline (most recent year ) Intermediate Indicator (2005) Target at End of PRSC/G Series 33% 55% 72% Under five mortality (per 1,000 births) Immunization coverage 83% 96% 95% Use of bed nets 4% 30% 60% Access to clean water and sanitation facilities 48% 50% 55% Clear regulatory framework for the energy sector adopted Transparent tariff setting mechanism in use Exports of goods and 8.3% 10.3% 12% services to GDP ratio Number of days to open 40 days Less than 21 days a business (2003) 20 days MTEFs for key ministries (education, health, water, and energy) prepared annually and budget allocations reflect MTEFs. Public Procurement Law complying with best practices published in Official Gazette. 17

30 Monitoring and Evaluation enforced Improved accountability of government to citizens Citizen Report Cards results disseminated to the public and used in Poverty Reduction Strategy monitoring to assess user satisfaction with services. 30. Furthermore, progress in harmonization amongst stakeholders under the first PRSC/G series, spearheaded by the World Bank, played and will continue to play a key role in the implementation and monitoring of GoR s overall performance and performance under budget support programs/the PRSC/G series in particular. Implementation of the first PRSP was supported by the work of sector cluster groups composed of representatives of donors and related ministries and government agencies. These clusters, charged with developing sector strategies and facilitating the implementation and monitoring of the PRSP and related programs, enhanced donor coordination and harmonization at sector levels. The Budget Support Harmonization Group has also served to enhance collaboration and monitoring and is an institutionalized mechanism for dialogue between GoR and development partners. 2.4 Expected Next Phase/Follow-up Operation (if any) 31. Based on GoR s strong track record, a second PRSC/G series has been launched starting with the PRSG IV, which was approved by the World Bank Board on January The second PRSG series (PRSGs IV, V, VI) will support GoR to implement the EDPRS. 32. The second PRSG series is expected to build on the first, continuing the focus on decentralized service delivery in education, health, water, and energy, with the addition of social protection and transport. PRSG IV will broaden the area of human resource development to include building the skills of the labor force, an essential element of the medium-term growth agenda. The Bank has maintained a strong dialogue with GoR on issues related to the EDPRS flagship, i.e., Vision 2020 Umurenge. This dialogue could lead to a gradual phase in support related to nutrition and social protection for PRSG V to VI. Furthermore, PRSG IV will continue to strengthen the linkages between planning, MTEF, and budgeting; and transparency and accountability. In line with GoR s decentralization agenda, implementation will focus much more on local level implementation, particularly in regard to building districts capacity to execute/implement, monitor, and report on budget transfers that are now their responsibility. 33. Specifically, the proposed second PRSG series will support programs in the EDPRS s three flagship areas (a) Growth for Jobs and Exports; (b) Vision 2020 Umurenge; and (c) Governance. PRSG IV is divided into two key parts: Growth for Jobs and Exports; and Improvement in Economic Governance and Development of Implementation Capacity, to help ease the constraints to sustained growth. 34. Building on the first PRSC/G series, PRSG IV will support GoR s Growth for Jobs and Export flagship program particularly by: (a) Investing in human capital and skills for growth and continue support to improve service delivery in health and education, with an increased emphasis on improving education and skills in science and technology. Under this flagship program, PRSG IV will support: 18

31 Health and nutrition to improve geographical access and financing of services; Education to increase number of well-trained teachers and make technical and vocational education training private sector oriented. (b) Improving economic infrastructure focusing on policy, institutional, and regulatory measures needed to increase access of the population to infrastructure services while reducing the cost of service delivery. Under this flag ship, PRSG IV will support: Electricity and urban water supply; Water resources, supply and sanitation; and Transportation, including a Road Maintenance and Financing Strategy. (c) Raising agricultural productivity and value-added exports, including investments in irrigation and water management, research and extension services, access and use of fertilizers and improved seeds and use of technology. (d) Deepening and broadening the financial sector by promoting access, promote development of finance and capital markets, and the development of a guarantee fund. 35. Building on the first PRSC/G series, PRSG IV will support the GoR s efforts to improve economic governance and capacity building particularly by: Strengthening public financial and economic management, including auditing and accounting reforms; Improving transparency of public procurement systems through further procurement regulations, training, improved procedures, and standard bidding documents; Strengthening fiscal decentralization by addressing increased needs for capacity on decentralized levels; Adopting civil reforms to build skills, incentives, and retention with a strong emphasis on training on the job, organizational effectiveness and integrated personnel and payroll systems; and Supporting the development of improved monitoring and evaluation framework to address needs and requirements under the EDPRS. 36. Now that the first PRSC/G series has built a strong foundation in key sectors, the second PRSG series aims to make cross-sectoral linkages much more explicitly. Support for implementation of GoR s Vision 2020 Umerenge, which focuses on cross-sectoral linkages for income generating and/or social protection programs at the village level, will be key in this regard. 3. Assessment of Outcomes 37. Since the first PRSC/G series supported a continual program of mutually reinforcing development objectives and consistent policy areas, the ratings for the series have been consolidated into one set for a holistic assessment as there would be no difference in the ratings for each individual operation. 3.1 Relevance of Objectives, Design and Implementation 19

32 (to current country and global priorities, and Bank assistance strategy) 38. Following on and consistent with the GoR s first PRSP, a Country Assistance Strategy (CAS) for Rwanda was discussed by the World Bank Board in December It articulated a Bank program of support around four themes (a) revitalization of the rural economy; (b) private sector development and employment creation; (c) human and social development; and (d) improvement in governance and effectiveness of public sector actions. The CAS highlighted the need to move progressively from project-based approaches to sector-wide approaches (SWAps) and budget support, envisaging a PRSC in the base case lending scenario. The CAS also proposed greater emphasis on economic and sector work, recognizing that, in its transition from post-conflict to development, Rwanda needed to establish a sound analytical basis for developing strategies and programs. Thus, the objectives of the PRSC/G series were aligned with the CAS, which reflected the GoR s priorities as outlined in its PRSP. The Interim Strategy Note presented to the Board in August 2006 continued to support the direction of the PRSC/G series while the EDPRS was under preparation. 3.2 Achievement of Program Development Objectives (including brief discussion of causal linkages between policy actions supported by the operation and outcomes) 39. The first PRSC/G series was successful in achieving its objectives. The objectives over the course of the series were consistent and focused on (a) decentralized service delivery; (b) private sector-led growth and agriculture transformation; and (c) public sector underpinnings for improved service delivery. While prior actions largely focused on laying the legal and regulatory framework that was lacking in Rwanda when PRSC/G series support began, policy dialogue in each of these areas was much more comprehensive and strategically focused on prioritization, efficiency, and effectiveness of public expenditures. Area 1: Improving Service Delivery for the Poor Education, Health, Water, and Energy; Transport, and Social Protection 40. Under this area, the PRSC/Gs supported GoR s service delivery agenda, with a focus on the four key sectors of education, health, water, and energy. With PRSC/G support, GoR was able to implement innovative approaches to decentralized service delivery, beginning with education and health under PRSC/G I and moving from dialogue to actions on water and energy under the subsequent operations. In education and health, this included performance-based contracting at the local level via capitation grants to schools and performance based payments for a basic package of health services at community health centers; in water, this included engaging local-level private operators. Shifting priorities in energy due to low-lake levels for hydro-generation led to a focus on the urgent need for generation capacity. At GoR s request, policy dialogue on transport was added under PRSG II and social protection under PRSG III. Key achievements in each sector over the PRSC/G series are described below. Education. The sector made early progress on its Education Sector Strategic Plan (ESSP) and related MTEF. Net primary school enrollment reached 95 percent in 2006 (up from 93 percent in 2004 and exceeding the PRSP target for 2008). The primary completion rate increased from 45 percent in 2004 to 52 percent in 2007 (but fell short of the target). The Organic Education 20

33 Law was adopted. Capitation grants (refer to Annex 2 for interview of beneficiaries of capitation grants) were transferred successfully from the central government to primary schools to cover the loss in fee income from the introduction of the GoR s policy of fee-free primary education announced at the beginning of the PRSC/G series; the size of the capitation grant increased from RwF300 per student in 2004, to RwF1,000 per student in 2005, to RwF2,500 per student in 2006, and RwFF5,300 per student in District Education Funds to support particularly needy students were adopted. A Higher Education Law was passed and the National Council for Higher Education and the Student Financing Agency of Rwanda were created to address issues of quality and create a sustainable source of funding in tertiary education. Donor coordination progressed to the provision of sector budget support in In 2006, Rwanda qualified for support under the Education for All-Fast Track Initiative. Despite significant progress, however the sector faces challenges going forward, including addressing high repetition and dropout rates and high teacher-student ratios. Health. Significant results were achieved in the health sector under the PRSC/G series. The focus was on the introduction of performance-based planning and budgeting and institutionalization and scaling up of performance-based contracting to all health facilities in the country, about half of which are private clinics. During 2005, the contractual approach for community health centers, piloted in Cyangugu and Butare in 2004, was extended to Kigali Ngali province and Kabgayi District in In 2006 it was expanded to the entire county with an impact evaluation nested in the program. Further investment in infrastructure and equipment at community health center and hospital levels was made and additional doctors and nurses were hired in Hiring and wage authority has also been devolved to the health facilities; health workers are now delinked from the central civil service. The introduction of mutuelles (community insurance schemes) has also proven a great success. Coverage by mutuelles increased from 27 percent in 2004 to 44 percent and 75 percent in 2005 and 2007, respectively, a unique performance in Sub-Saharan Africa (see Figure 3). As with most areas, while direct attribution of results to support by the PRSC/G series is difficult to prove conclusively, rigorous impact analysis of health sector reforms is being pursued to provide at least as conclusive evidence as possible to substantiate the impressive results achieved. Figure 3. Community Health Insurance Coverage (Mutuelles), % 75% 44% 27% 7% In addition, utilization of health services increased: contraceptive prevalence increased from 7 percent in 2003 to 28 percent in 2007, a remarkable result by international standards. 21

34 Utilization of assisted deliveries increased from 29 percent in 2000 to 39 percent of the population in 2005 and is now estimated at 52 percent. Outcomes are consequently improving. HIV prevalence is on the decline and fertility and under five mortality have decreased dramatically putting Rwanda back on track to achieve the health MDGs. Table 5 further illustrates the progress in these and several other key health indicators. Table 5. Progress in Health Status Indicators: Comparison of DHS 2005 and DHS 2008 Indicators DHS-2005 DHS-2008 Contraceptive prevalence: All methods 17% 36% Contraceptive prevalence: Modern methods 10% 27% Antenatal Care 94% 96% Delivery in Health Centers 39% 52% Infant Mortality rate 86 per 1000 live births 62 per 1000 live births Under-Five Mortality rate 152 per 1000 live births 103 per 1000 live births Anemia Prevalence : Children 56% 48% Anemia Prevalence : Women 33% 27% Vaccination : All 75% 80.4% Vaccination : Measles 86% 90% Use of Insecticide treated nets among children less 4% 67% than 5 Fertility 6.1 children 5.5 children Furthermore, utilization of insecticide treated nets increased from 4 percent in 2003 to 30 percent in 2005 and 65 percent in 2006 and malaria incidence decreased by 60 percent and malaria mortality by 50 percent (see Figure 4). Figure 4. Decrease in Malaria Incidence and Malaria Deaths, Water. Expenditures in the water sector increased significantly between 2003 and 2007 as a result of the acceleration of physical execution of projects in rural and urban areas. The increase reflects an increase in coverage from 48 percent of the population in 2004 to 71 percent in 2007 (see Figure 5). 22

35 Figure 5. Increase in Access to Water, cumulative # people with access & coverage (% of total population) 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , % 80% 71% 64% 57% 43% 47% est 2009 est Source: Government of Rwanda, April 2008 As a result of these increased expenditures, access rate to potable water increased between 2001 and 2005 from 41 percent to 55 percent in rural areas and from 66 percent to 69 percent in urban areas, and had increased to 71 percent by As such, the PRSG IV indicator of 70 percent of the population having access to an improved water source is already achieved. An additional 636,766 people gained access to safe water through the construction of more than 1,000 new water points, compared to an additional 598,000 and 167,000 persons in rural areas in 2005 in 2004, respectively. In addition, the functionality of rural water systems increased to 75 percent, and 8 percent of the 830 piped water systems are privately managed. A major contribution to the water sector by the PRSC/G series was the transfer of the successful Rural Water Supply and Sanitation Project to be fully funded by GoR via budget support and which opened to the public in It reaches about 20,000 citizens of the Huye District and will be transferred to a private operator following a bidding process to begin by June Another key achievement is that in 2006, all districts as part of their IMIHIGO performance contracts, committed to expand their respective household sanitation coverage to 100 percent, with an intermediate goal to be reached under the EDPRS of 45 percent coverage (refer to Annex 2 for further details about beneficiaries experience with PRSC/G support for water and sanitation). The PRSC/G series was also instrumental in improving donor coordination in the water sector, which was a factor in the significant achievements. On the policy front, this also included the drafting of a water policy and adoption by GoR of a Hygiene and Sanitation Strategy in Energy. In 2005, GoR adopted a cost pass-through of increased oil prices, and in 2006 power outages were significantly reduced with procurement of diesel generators (with topping up from PRSC/G funds) to supplement generation capacity in response to low-lake levels for hydro-generation. GoR also moved quickly to initiate progress on Lake Kivu methane gas development. An energy sector policy paper, including rural electrification, was adopted, but sector budgeting remained weak due to preoccupation with the generation crisis. As part of the dialogue between the Bank and GoR in this sector, planning and budgeting was improved with prioritization of investments. The PRSC/G series also provided a solution in terms of the topping up of funds to support extra diesel generation capacity. 23

36 41. While dialogue and policy actions (though not prior actions) on transport and social protection were included in the later stages of the first PRSC/G series, these areas particularly social protection will be of much greater focus under the second PRSG series. Area 2: Private Sector-led Growth and Agriculture Transformation for Poverty Reduction 42. Support under the PRSC/G series in this area was aligned with GoR s strategy for growth, which was built on two key drivers: private sector development and agricultural transformation. The GoR s strategy included diversifying the economy through export promotion, increased trade, expansion of tourism, improvements in the banking/financial sector, introduction of ICT, and increased agricultural productivity. Key achievements in this area are summarized below. Privatization and Financial Sector. From the outset of the PRSC/G series, GoR was committed to privatization. Over the period , privatizations were completed in the tea, coffee, and telecommunication sectors. Rwandatel (the state telecommunications company), RwandaEx (the national coffee exporter), and the Nshili Kivu, Nyabihu and Rubaya tea factories were privatized. Under PRSG II, a remaining six tea factories were under rehabilitation and restructuring by the government to ensure that credible strategic partners would be found for their privatization. GoR also privatized holdings in the financial sector, selling its shares in two major banks (a reform agenda supported originally under a Bankfinanced adjustment operation and taken up under the PRSC/G series). The overall financial soundness of the commercial banking sector was also improved due to the strengthening of banking sector regulation and supervision, the introduction of a regulatory framework for microfinance, and the successful creation of a School of Finance and Banking. GoR also undertook strong reforms in the judicial sector, upgrading the public credit information system, and efforts are ongoing to modernize the legal and regulatory framework for commercial and financial transactions. Investment Climate. Building on the revision of the investment code to align with the revised tax code, and the establishment of a Commercial Chamber in 2004, with support from the first PRSC/G series, Rwanda s investment climate improved significantly. The number of days to open a business decreased from over 40 at the beginning of the series to just 16 by the end of the series. Reflecting such progress, Rwanda was named a Top 10 Performer in the World Bank Group s 2006 Doing Business Report. That said, Rwanda still ranks 150 out of 178 countries, due mainly to the bureaucratic and financial costs related to doing business in the country, particularly in regard to closing a business, trading across borders, and protecting investors. To address this, GoR has elaborated a Doing Business Action Plan and has prioritized reforms that can be adapted to quickly address problems related to the high bureaucratic and administrative costs. This will be an area receiving continued support under the next PRSG series. In an effort to improve the investment climate, as part of the GoR s ICT strategy, lying of fiber optic cable across the country and installation of wireless capability was pursued over the course of the PRSC/G series; these efforts are ongoing. GoR is also moving to improve coordination among agencies, development partners, and stakeholders engaged in trade and the private sector related issues. 24

37 Export Promotion, Diversification. A key development evolving out of GoR s significant progress in the area of private sector development was the elaboration and adoption of an export promotion strategy over 2004/2005. This included restructuring of the Rwanda Investment and Export Promotion Agency (RIEPA), which then led implementation of the strategy. As part of the strategy, an Export Processing Zone (EPZ) was designated by the GoR and a first phase of development began in Increased production of traditional exports saw receipts from coffee increasing from US$38 million in 2005 to US$51 million in 2006 and receipts from tea increasing from US$24 million in 2005 to US$34 million in Implementation of the Fully Washed Coffee Strategy saw a steady increase in the volume and percentage of production of fully washed coffee from , which fetches a premium price. Since 2000, production of fully washed coffee grew 2,315 percent, with the number of coffee washing stations increasing from 11 in 2002 to 84 in Tea production steadily increased from 13.0 million kilograms in 2004 to 16.6 million kilograms in Efforts to diversify exports also paid off, with hides and skins production and minerals (cassiterite, coltan) exports increasing in 2005 and 2006, along with tourism receipts and numbers of visitors. The volume of hides and skins processed in 2005 increased by 48 percent over 2004, with the value increasing by 40 percent, to US$4.7 million, but also faced challenges between 2006 and The volume of flowers, fruits, and vegetables exported in 2005 increased 343 percent over However, it is important to note that between 2006 and 2007 coffee and tea exports took a hit partially due to external factors and partially due to local problems, decreasing 34 percent and 1 percent respectively. Specifically, coffee production dropped from 26,500 tons in 2006, to 13,600 tons in There was some benefit from rising international prices with Rwandan high quality coffee taking an extra premium price compared to other countries. Tea production rose by 20 percent over the year, but international prices fell by 11 percent due to increased supplies. These issues were addressed by stakeholders at the last Joint Budget Support Review in April 2008 and will necessitate close monitoring and evaluation during the next PRSG series. Between 2006 and 2007, overall export receipts rose by 19.9 percent with mineral receipts increasing by 93 percent due to the current commodities boom, which offset some of the decline in tea and coffee receipts. Figure 6 illustrates the steady trend in export of goods between 2003 and To improve its trade linkages, Rwanda joined the Common Market for Eastern and Southern Africa (COMESA) and is now a full member of the East African Community (EAC). 200 Figure 6. Increase in Export of Goods, In million US$ Source: Government of Rwanda, 2008 Export Goods 25

38 Tourism. The Rwanda Office of Tourism and National Parks (ORTPN) was reorganized to take the lead in implementing the GoR s tourism medium-term strategic plan, including diversification of tourist sites and packages and increased accommodation. Tourist visits reached 26,998 in 2004, but declined slightly to 24,120 in However, in both 2004 and 2005, tourist receipts were exceeded by at least US$4 million above targets. Agricultural Transformation. Before the PRSC/G series, the agriculture sector did not have a clear strategy/vision and progress under a World Bank Rural Sector Support Project was stalled. Sector dialogue under PRSC/G I helped to unblock obstacles and, in 2005, a Strategic Plan for Agricultural Transformation (PSTA) was adopted with four priority program areas: intensification and development of sustainable production systems; support to professionalization of farmers; promotion of commodity chains and development of agribusiness; and institutional development. A sector MTEF was developed in 2005 and 2006 that was aligned with the PSTA; the PRSP matrix was also updated to reflect PSTA priorities. In 2005 a Land Policy and Land Law guaranteeing tenurial security and potentially permitting the development of a land market were adopted, and an Agriculture Guarantee Facility was established. In 2005, the total volume of fertilizer imports also increased 90.6 percent over 2004 as part of the drive to boost agricultural productivity. In 2006, key implementing agencies the Rwanda Agriculture Development Authority (RADA) and Rwanda Animal Resources Development Authority (RARDA) were established, and the agriculture research institute was restructured to improve its representation in different agricultural zones and develop a technology transfer unit. In 2006, earmarked transfers to local government began, in line with the national decentralization and territorial reform process and also in line with PSTA national priorities. Funds were transferred for terracing and animal disease control operations at district level, with technical oversight from RADA and RARDA. This expanded in the 2007 budget with earmarked grants for animal disease control; extension; erosion control; rural infrastructure; water harvesting and hillside irrigation; and food security. However, the agricultural sector still faces major challenges and will need further attention during the next PRSG series. Area 3: Public Sector Underpinnings for Improved Service Delivery Public Expenditure Management, Transparency and Accountability, and Monitoring and Evaluation 43. Throughout the PRSC/G series, the GoR placed a high priority on the enhancement of its public financial management system in order to address weaknesses and improve the transparency and accountability of government. With PRSC/G support, GoR focused on strengthening the linkages between strategic planning, the MTEF, and budgeting, which became even more critical in the context of fiscal decentralization in Establishing the legal and regulatory framework for financial management and procurement, and beginning to build human resource capacity in accounting and auditing were critical achievements under the PRSC/G series. While monitoring and evaluation progressed under the PRSC/G series, it remained one of the weakest areas. Public Financial Management. Key achievements included the creation of the positions and appointment of the Auditor General and Accountant General in 2004 and the publication of the first report of the Auditor General in 2006; the adoption of the SMARTGOV budget system, which was supplemented with Sage Pastel software in 2006 to fill gaps in budget reporting 26

39 capabilities; the move toward a Single Treasury Account; the establishment of a Treasury Management Committee; and the adoption of the Organic Law on State Finance and Property (i.e., Organic Budget Law) in Efforts to improve linkages between planning, MTEFs, and budgeting were made at the national and sectoral levels, most notably in education, health, water, and agriculture. With GoR s push to decentralize expenditures in 2006, transfers from the center to local level governments were successfully made without disruption in key services. As part of this process and throughout the dialogue on public financial management reforms under the PRSC/G series, GoR realized the need to reform its budget and revise its budget classification system. This will be a key focus under the next PRSG series. Under the first PRSC/G series, a decision was taken to conduct annual sectoral public expenditure reviews (PERs), which will feed into the planning and budgeting process. Less progress on incorporating the recurrent and development budgets was made under the first PRSC/G series than was envisaged, but this will also be a key focus under the next series. With support from the PRSC/G companion Public Sector Capacity Building Project, GoR launched the Rwanda Expertise Scheme. Following a needs assessment, GoR recruited and trained 200 accountants and internal auditors in 2006 for deployment at central and decentralized levels of government. Under the PRSC/G series, close collaboration on the public financial management reform agenda was forged between GoR and donor partners. As a result of GoR s strong commitment to implement reforms and as a result of progress, a special Multi-donor Trust Fund for Public Financial Management was established in The public financial management reform agenda is led by the Accountant General and a wellrepresented inter-governmental Public Financial Management Steering Committee. Transparency and Accountability. In addition to public financial management reforms, good governance and enhancement of citizen s voice and accountability to citizens in the provision of services were part of GoR s approach to enhancing transparency and accountability. This began with the strengthening of government institutions with the adoption of the new Constitution and successful presidential and legislative elections in Rwanda further strengthened government institutions by formally separating the judiciary from the executive and legislative branches, and creating the Supreme Court and Office of the Ombudsman. In follow-up to the territorial reform law in January 2006, local elections in February and March 2006 filled out the new administrative structure of the country. Over , the Gacaca process (community-level hearings) for those who committed acts during the genocide was under way throughout the country. Over the PRSC/G period, GoR also implemented its strategic plan to combat corruption and the media was further liberalized. In addition to political reforms, in CRCs and CSCs were developed and piloted for education and health, and adopted in 2006 as the instrument to help monitor accountability and citizens voice in service provision. CRCs were designed to elicit feedback from citizens at a micro level while CSCs were designed to elicit feedback at the macro level. CRCs collect quantitative feedback on user perceptions on the quality, adequacy, and efficiency of public services through individually-based sample surveys. CSCs are a qualitative monitoring tool used for local level monitoring and performance evaluation of services, projects, and government administrative units by communities; information is collected through focus group discussions. Going forward, CRCs and CSCs are expected to improve dialogue between 27

40 frontline service providers and users/ rights holders. The CRC/CSC promotes individuals and communities ownership of evaluation outcomes and broadens citizens understanding of policies, strategies, and implementation processes, particularly decentralized service delivery. (See Annex 2 for further details about the findings of the CRCs/CSCs.) Given its importance to transparency and accountability, adoption of a modern Procurement Code, which was lacking in Rwanda at the start of the PRSC/G series, was a key part of the agenda from the outset, based on a comprehensive Country Procurement Issues Paper. However, dialogue in this area proved more difficult than any other area under the PRSC/G series, largely due to misunderstandings between GoR and the Bank on what was expected in regard to ensuring that the law reflected international best practice. In addition, lack of strong leadership on the procurement reform agenda, lack of coordination of all ministries in charge of implementing reforms in this area, lack of a comprehensive action plan, and the need to address capacity, roles, and responsibilities of decentralized procurement entities (which were introduced over the course of the program) caused delays. Thus, instead of seeing the law submitted to Parliament in 2004, it was not until 2007 that it was adopted with passage of the law made a condition of effectiveness for PRSG III. Recognizing that dialogue in the area of procurement was overly focused on the passage of the law, GoR and the Bank began to focus on practical solutions in the interim, including the drafting of standard bidding documents, procurement guidelines, and capacity building for procurement officers. The Procurement Law adopted in 2007 reflects international best practice procurement processes and transforms the National Tender Board from an operational to a regulatory agency. Implementation of the law will be a focus under the next PRSG series. Monitoring and Evaluation. In addition to CRCs and CSCs, the annual progress report on the GoR s PRSP, Sector Issues Papers, and MTEFs for key sectors are used as monitoring and evaluation tools. While MINECOFIN has established clear responsibility for overall monitoring and evaluation of poverty reduction programs, the challenge of instituting a government-wide monitoring and evaluation system remains. PERs were undertaken in several sectors with support from various donors with the World Bank as the main catalyst. Also Public Expenditure Tracking Surveys (PETS) were undertaken as part of the monitoring and evaluation process. As part of EDPRS preparation, GoR conducted key sectoral and program evaluations and developed key performance indicators (incorporating a bottom-up approach) for each sector/program as a basis for detailed logical frameworks for monitoring. These log frames will form the basis of the GoR s monitoring and evaluation system going forward. Good data collection and statistical capacity building will be key. 3.3 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs) Rating: Satisfactory 44. The overall outcome rating is satisfactory. While the achievements under the first PRSC/G series far exceeded expectations and plans at the outset of the program, and the PDOs were in most cases met or exceeded, the outcome is modestly rated satisfactory in recognition that some areas, particularly procurement, did not progress as expected. That said, success in the area of 28

41 decentralized service delivery was above and beyond sector plans including GoR s ability to transfer capitation grants to schools and to move rapidly year-on-year to increase the amount of the grants steadily; GoR s readiness to move from pilot to country-wide implementation of performance-based contracts with community health centers; and expansion of local-level private operations for rural water schemes with some achievements, particularly in the health sector, unique in Africa. The fact that the GoR was then able to decentralize budget execution and implementation without service disruptions indicates the level of commitment to making the program work. Despite longer than expected delays in the adoption of a new Procurement Law, GoR demonstrated its strong commitment to public financial management reforms throughout the program and steady progress was made in this area. Noteworthy as well is the very positive feedback received by GoR, stakeholders, and beneficiaries that further supports a strong overall outcome rating of the program (see Section 7 for a more detailed summary). For example, GoR has highlighted the Bank s much valued contribution to early disbursements and donor coordination and the value of a strong dialogue that instilled mutual trust and provided much substance to often interesting debates on policy choices, especially during the scaling-up of GoR s decentralization program, which has become the main mechanism for implementation of many key programs. Even given difficulties in assigning causality to specific results under the PRSC/G series, GoR attributes much of the success of its reform program during this time period and now bearing fruit to the strong support by the Bank under the PRSC/G series. 3.4 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development 45. Poverty Impacts. According to the HLSS (EICV II), at the national level the proportion of the Rwandan population identified as poor fell from 60.4 percent in to 56.9 percent in The study looked at three stratums of society Kigali, other urban, and rural areas and poverty declined in each, with the largest percentage point reduction in urban areas outside Kigali. Rural poverty reduction is also statistically significant, though those in urban areas are not, in part reflecting the smaller sample sizes there. While the overall decline represents reasonable progress in poverty reduction terms, the study noted that there was significant population growth over the period: an average of around 2.7 percent per annum. 3 Thus, although the percentage of the population defined as poor fell, the total number of Rwandans living in poverty is estimated to have increased from around 4.8 million in to 5.4 million in due to population growth. In terms of progress toward the MDGs, Rwanda s status is summarized in Table 6. Table 6. Reaching the MDGs: Rwanda s Status as of 2007 MDGs Goal (all goals set as improvements 1990 between 1990 and 2015) Goal 1. Halve the proportion of people Eradicate living under one dollar a day extreme poverty and MDG target 2015 Most recent year Likelihood of reaching the target by % 30.2% 56.9% Challenging. Will require strong sustained growth, coupled with an emphasis on increased productivity in the agriculture 3 Per GoR s own 2007 estimates. WHO 2006 estimates of 2.8% annual population growth. 29

42 hunger Goal 2. Achieve universal primary education Goal 3. Promote gender equality and empower women Goal 4. Reduce child mortality Goal 5. Improve maternal health Goal 6. Combat HIV/AIDS, malaria and other diseases Goal 7. Ensure Halve the proportion of malnourished children Have all children enrolled in primary school Have all children completing primary school Ensure full literacy rate for 15- to 24-year old Eliminate the gender gap in primary education Eliminate the gender gap in secondary education Eliminate the gender gap in literacy Reduce by two third the under-five mortality rate (per thousand births) Reduce by two third the infant mortality rate (per thousand births) Have all 11- to 23-month-old children immunized against measles Increase contraceptive prevalence among women aged 15 to 49 Reduce maternal mortality by three quarters (per 100,000 births) Have all births attended by skilled health personnel sector. 30% 15% 22.5% Challenging. Subject to strong sustained economic growth and nutrition interventions. GoR is addressing issue through new demand-side RBF health innovations. 67% 100% 95% Attainable. 44% 100% 55% Achievable, subject to increased funding for primary education by $4.5 per capita per year. 73% 100% 85% Attainable. 0.6% 0% -3.7% Already achieved. 24% 0% 0% Achievable, subject to effective implementation of current policies aimed at ensuring universal access to a 9-year basic education. 14% 0% 3% Likely. Differences in enrollment of male and female primary students are now minimal Achievable, subject to increased funding for high impact interventions and vulnerable groups by $3 per capita per year. 83% 100% 96% Already achieved (sustain). 21% n/a 28% Challenging but improving Challenging. Would require major upgrading of health system, and tripling public spending on health.. However, GoR is addressing this issue through new demand-side RBF health innovations. 25% 100% 39% Achievable, subject to increased funding for high impact interventions and vulnerable groups by $3 per capita per year. GoR is addressing issue through new demand-side RBF health innovations. 13% 5.1% 3% Already achieved, but needs to be Stabilize or reduce HIV/AIDS prevalence (1997) sustained. Use of Bed nets (children <5) na 90% 65% Significant progress, having contributed to significant decrease of malaria related mortality. Maintain or increase land area -- n/a 12% Unlikely. Deforestation is an covered by forest issue. environmental Reduce by half the proportion of 42% 21% 29% Achievable, subject to investment 30

43 sustainability people having no access to safe water. of $2.8 per year per capita over 10 years. 46. Gender. In November 1999, GoR adopted a revised civil code, giving women the right to inherit and own property and reserving seats for women in the National Assembly and elected local councils. Following the 2003 elections, 40 percent of elected members of parliament were women (the highest in the world at the time). GoR also launched a Gender Budget Initiative, to facilitate the promotion of gender equality and improve the effectiveness of the budget process. The Ministry of Gender and Women in Development has forged a strong coalition with local women s NGOs to champion the integration of women into the development process and give them a strong voice in society. GoR adopted the National Gender Plan of Action ( ) to meet obligations under international conventions on the rights of women, and a Comprehensive Legal Action Plan for the elimination of all gender disparities. 47. Environmental and Social Analysis. PRSC/G I was prepared under the Bank s Operational Directive 8.60, Adjustment Lending Policy, under which it was considered a sector adjustment credit. As such, Operational Policy 4.01, Environmental Assessment, applied. For purposes of environmental assessment, the operation was designated category B. During the preparation of the operation, an Environmental Assessment and Social Management Analysis was carried out to identify potential positive and negative linkages between actions under the operation and environmental and social impacts. The assessment analyzed the environmental and social issues associated with the four main PRSC/G-targeted sectors (education, health, water, and energy) and, incorporating environmental and social analysis undertaken for other Bank operations, examined national and local public sector agencies roles and responsibilities to manage such issues. The broad purpose of the assessment was to assist GoR in identifying and eventually establishing the regulatory, administrative, and technical capacity within Rwanda to ensure that for each development program or project undertaken in the country, environmental and social impacts are identified, mitigated, and monitored as part of the sustainable use and management of Rwanda s natural resources and the environment. The assessment identified Rwanda s key environmental concerns as: land degradation, deforestation, water contamination, loss of biodiversity and habitats, and wetlands degradation. It identified an indicative set of key measures to help guide GoR in public sector management and monitoring in each of these areas, particularly in relation to PRSC/G targeted sectors. The assessment also examined the Bank s safeguards definition of social impacts in regard to involuntary resettlement, indigenous peoples, and cultural property. Any potentially adverse environmental impacts were deemed to be sufficiently addressed by the safeguard measures incorporated as part of ongoing Bank investment operations. The PRSC/G series supported the capacity building of the Rwanda Environment Management Authority (REMA), which was newly established in While the GoR allocated budget to REMA s activities, its capacity remained weak over the PRSC/G series. Given its important role in setting standards for certain export promotion and tourism activities, it is likely to be the focus of additional capacity building efforts under the second PRSG series. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) 48. The first PRSC/G series contributed to institutional strengthening in many ways. The process associated with PRSC/G implementation helped to build MINECOFIN s capacity to 31

44 coordinate policy dialogue with donor partners and other stakeholders and engage on a range of issues. This helped to solidify relationships between MINECOFIN and line ministries, in turn strengthening line ministries as a result of having to be responsive to MINECOFIN. The PRSC/G series also supported the development of the overall architecture of services and fiscal decentralization. Several pieces of key legislation were enacted under the PRSC/G series, including the Organic Budget Law, the Organic Education Law, the Land Law, and the Procurement Law, laying the foundation for implementation under the next series. Several new agencies were also created under the PRSC/G series, including RADA, RARDA, and the School of Finance and Banking; other agencies, including RIEPA, the agriculture research center, ORTPN, and the National Tender Board, the Office of the Accountant General, and the Office of the Auditor General were strengthened and/or restructured. (c) Other Unintended Outcomes and Impacts (positive and negative) 49. As described above, the program was more successful from the outset than originally envisioned, which allowed for implementation of a more ambitious program, resulting in positive impacts beyond expectations. 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) 50. Overall the feedback from beneficiaries through the beneficiary surveys and workshop held in Rwanda relay a consistent message of mutual respect between the PRSC/G series team and the beneficiaries (refer to Annex 2 for more details). There is common agreement that the outcomes in terms of key programs supported by the PRSC/G series, such as the capitation grants, the performance-based financing of health centers, mutuelles, the water and sanitation project in Huye District, and block grant and earmarked transfers to districts. These programs have helped provide significant results in key sectors and in improved service delivery as part of the decentralization. From the GoR side, the PRSC/G series was crucial in helping solve the energy crisis that hit hard and unexpectedly in 2004 (the flexibility of budget support was of value in this regard); in helping in planning and budgeting of key sectors, including agriculture which lacked a clear strategy; and in encouraging other budget support donors to align their disbursements in the first two quarters of the budget year. From local government the feedback is consistently positive, for instance in regard to capitation and other earmarked programs together with the introduction of block transfers. Although block grants still remain small in comparison to operational needs, these transfers have together with earmarked transfers led to tangible results according to officials. Also, specific projects, such as the water and sanitation project, which transitioned from investment to budget support, received very strong positive feedback from all beneficiaries. Box 2 summarizes feedback from a limited sample of beneficiaries on key areas supported by the first PRSC/G series. Box 2. Summary of Beneficiaries Feedback on Key Areas Under the First PRSC/G Series Capitation Grants. The primary school interviewed in Bugesera District reported that much had been improved due to increased capitation grant funding. The following was reported to be supported by capitation grants: bonuses to teachers to ensure improved quality of teaching; energy installation to allow students to study after dark and to qualify the school for free computers for administrative use; a new library; maintenance of sanitary latrines and school grounds (including gardens and fencing), which has helped improve hygiene; supplementary ingredients to meals prepared each day for students, which has helped reduce dropout rates in school from 100 students per 1,000 to 5 per 32

45 1,000. Parent-Teacher Association representatives reported that quality of teaching is satisfactory and that teachers are motivated to provide tutoring after hours. The secondary school interviewed in same district reported that the capitation grant was the only funding received by the school and that without it the school would be in a state of emergency. However, it was evident that the school still struggle to meet the needs of the students, including the need for new school facilities (currently rented for free from district) for which the capitation grant is not sufficient. Mutuelles and PBF. The Gahini District hospital reports that since mutuelles were implemented, health outcomes at the district hospital level improved significantly, with the mutuelle coverage rate in the district at 86 percent (2008). Prior to the introduction of mutuelles in 2003, utilization rate of health services was around 15 percent but improved significantly to current levels of around 80 percent; financial access to health services has improved; and assisted deliveries have gone from 15 percent of women in to 75 percent of women in IMIHIGO contracts are linked to mutuelles, and with strong political commitment from local authorities, the district hospital reports that this provides a strong incentive to mobilize resources and to reach out to the communities in regard to health benefits. Rural Water Supply and Sanitation Project. Feedback from beneficiaries and stakeholders of the project supported by the PRSC/G are overwhelmingly positive. Government officials highlighted the strong support, yet autonomy, to make decisions on the ground as one of the corner stones to the success of the program. Furthermore, the ongoing support and trust between MINITERE and the Bank to support the implementation process was key as was the timely disbursements of funds and smooth procurement processing. Construction under the project finished ahead of schedule. The project is considered one of best-practice which local officials on all levels interviewed (district, secteur, and cellule level) with calls for more projects like this one going forward. Direct beneficiaries, namely community members using the newly built water taps, report that the time to fetch water has reduced significantly, from minutes to 5-10 minutes, resulting in more frequent trips per day to meet its water supply needs and often providing the only source of clean water. All beneficiaries interviewed reported they would be willing to pay for the water (as will be required once the project is transferred to private management). 4. Assessment of Risk to Development Outcome Rating: Moderate 51. The risk to development outcome is moderate. GoR has strongly supported the PRSC/G series as an effective instrument to implement its poverty reduction strategy. The strong track record under the first PRSC/G series and the GoR s agenda of reforms going forward, spelled out in its EDPRS, represent strong ingredients for sustaining the results achieved under the first series. Building on achievements under the first PRSC/G series, GoR and the Bank are in agreement to continue support via a second PRSG series. However, there are real risks to development outcomes that must be acknowledged. These risks include (a) potential flare-ups in the region, bringing instability that could interrupt reforms; (b) the potential for reform fatigue domestically; and (c) potential increased fiscal indiscipline as more resources flow in the form of budget support. 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory 33

46 52. Bank performance in ensuring quality at entry is rated satisfactory. The identification and design of the PRSC/G series was based on GoR s PRSP and the Bank s CAS. The reform program was based on a solid body of analytic work (see Table 7) and lessons learned from the Bank s projects and programs in Rwanda up to that point were taken into account. Concept and decision reviews provided good guidance to the team on the design of the operations, and consistency of task team leadership and team members was maintained throughout the series, building a strong track record on the Bank s side. The Bank team worked closely with GoR and other donors from the outset, though additional time and effort to pave the way for the Bank s engagement with the GoR s larger donor partners who were already providing budget support when the Bank made the decision to move to budget support would have been welcome. What began as a somewhat tense relationship with certain donors, evolved into close collaboration and mutual understanding and respect after the first year of the program. Key success factors reported by GoR included the Bank s (a) commitment to early and predictable disbursements; (b) lead on establishing the biannual Joint Budget Support Reviews; (c) support of GoR s decentralization efforts; and (d) support in improving planning, budgeting, and reporting, including the introduction of resultsbased MTEFs for key sectors. Table 7. Analytical Underpinnings for the First PRSC/G Series Area Study/Report Poverty Data EICV I/Household Living Standards Survey (2000/2001) Core Welfare Indicators Questionnaire (2001) Rwanda Poverty Assessment (2003) EICV II/Household Living Standards Survey (2006) Education Education Country Status Report (2003) Education in Rwanda: Rebalancing Resources to Accelerate Post-conflict Development and Poverty Reduction (2003) Mapping Ways Forward: Planning for 9-Year Basic Education in Rwanda (2005) Framework for Aid Coordination: Improving the Provision & Management of External Support to Education (2005) Literacy Survey Education Country Status Report - Update (2006) Health Health, Nutrition, and Population Country Status Report (2004) Impact Evaluation of Community Based Schemes, Contractual Approach, and HIV/AIDS Program (baseline conducted 2005) Demographic Health Survey (2006) Health Country Status Report (2006) Labor Market Health Survey (2006/2007) Energy Market Study of Urban Energy and Water Usage (2006/2007) Assessment of Rural High-Priority Electricity/ICT/Water Needs (2006/2007) Water Legal, Institutional and Regulatory Framework Study on Integrated and Sustainable Management of Water Resources (2005) Diagnostic Study on Human Resources and Training Needs at Central and Decentralized Levels (2005) Study on the Investment Program for Sustainable Water Resources Management & Protection of the Environment (2005) Private Sector Poverty and Social Impact Analysis in the Tea Sector (2005) Development Diagnostic Trade Integration Study (2005) and Growth and Doing Business (2005, 2006, 2007) Agriculture Country Economic Memorandum: Sources of Growth, Study on Manufacturing (2006) Investment Climate Assessment (2006) Agriculture Policy Note (2006) Debt Sustainability Analysis (2006) Transparency and Public Expenditure Review (2007) Financial Accountability Review and Action Plan (2003/2004) Country Procurement Issues Paper (2004) 34

47 Accountability Country Financial Accountability Assessment (2005) Financial Sector Assessment Program/Review of Observance of Standards and Codes (2005) Report of the Auditor General to Parliament (2005) Social Protection Public Expenditure Review (2006) Transport Private Sector Participation Opportunities in Transport Study (2003) Diagnostic Trade Integration Study Transport Component (2005) Transport Sector Policy Assessment (2006) Assessment of Road Fund Performance (2006) Memorandum of Understanding between the World Bank, EU, and AfDB (2006) (b) Quality of Supervision (including M&E arrangements) Rating: Satisfactory 53. Quality of Bank supervision is rated satisfactory. Supervision drew mainly on the twiceyearly joint budget support reviews which, along with PRSP annual progress reports, provided adequate information on budget expenditures and implementation of key reform programs to track progress under the PRSC/G series. Supervision was combined with preparation of the follow-on operation: the first joint review of year, which looked back at progress over the previous year, served as supervision as well as pre-appraisal of the next operation; the second joint review of the year, which looked forward, served as supervision and appraisal of the next operation. Supervision was coordinated closely with donor partners via the joint review, and with IMF reviews. Supervision drew on the monitoring and evaluation tools, including the PRSP progress reports, CRCs, CSCs, and so on, used by GoR and reported to donors to track progress under the program. Specific studies (e.g., DHS, Education Sector Review reports, etc.) were also used to delve indepth into results over the course of the program. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 54. Based on the quality of lending and supervision, overall Bank performance is rated satisfactory. Feedback received from beneficiaries both on central and local levels (see Annex 2) strongly support the satisfactory ratings. Furthermore, as the section above shows, the PRSC/G series reached and often exceeded its objectives and indicators, thus the Bank worked closely with the GoR over the course of the program to readjust and add indicators to take into account progress and the evolving reform agenda. 5.2 Borrower Performance NOTE: When the government and implementing agency are indistinguishable, provide rating and justification only for Overall Borrower Performance. (a) Government Performance Rating: Highly Satisfactory 35

48 55. Government performance is rated highly satisfactory. As with GoR s implementation of its PRSP, implementation of support under the PRSC/G series involved many ministries and agencies of government. GoR s commitment to the PRSC/G-supported reform program was evidenced by its solid track record of results under an ambitious program owned and driven by GoR. All prior actions for PRSC/G I were achieved. Prior actions under PRSG II and PRSG III were also largely achieved as planned with the exception of two areas: private-sector led growth and transparency and accountability. Regarding the former, the prior action was revised to reflect the importance of microfinance over privatization of tea factories. While the GoR remained committed and was implementing a strategy to privatize tea factories in the most beneficial manner, the importance of tea factory privatization ceased to be as significant once GoR began implementing its export promotion strategy. Regarding the latter, this was the one area of true difficulty between GoR and the Bank. Adoption of procurement legislation was slower than anticipated due to miscommunication and lack of understanding by both parties of the other s position. Practical solutions were found along the way and, in the end, the desired outcome was achieved. Over the course of the program, Rwanda also showed progress toward the MDGs, in particular in the areas of education and health (as illustrated in Table 6 above). In sum, it was due to the GoR s efforts and steadfast commitment to its reform program that the first PRSC/G series was successful beyond expectations. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 56. MINECOFIN s performance is rated satisfactory. While many ministries and agencies of government were involved in making the first PRSC/G series a success, MINECOFIN, as the implementing agency, was responsible for coordinating GoR s overall effort. Though stretched thinly, MINECOFIN s impressive human resource capacity, keen grasp of the issues, and ability to work well and negotiate with donor partners, were key to the success of the first PRSC/G series. (c) Justification of Rating for Overall Borrower Performance Rating: Highly Satisfactory 57. Based on GoR s performance and that of MINECOFIN, the rating for overall Borrower performance is highly satisfactory. While many priority actions remained as envisioned, some were modified as GoR underestimated the time it would take for Parliament to review legislation or was overambitious in its time estimates (in particular in the civil service reform program carried out over ) which diminished GoR s capacity to implement its reform agenda in shortterm. However, overall GoR made steady progress in implementing its policy reform agenda. GoR remained committed to its policy objectives and to achieving the MDGs, delivered mostly on time (and often ahead of time), showed strong political commitment, and continued to demonstrate to stakeholders that it aspires to meet best international standards in its reform measures and in areas of accountability and transparency. Although GoR struggles to meet some MDGs, it has made significant progress in several MDGs (including health and education) and showed early on its commitment to address the lagging MDGs by considering new innovative initiatives in collaboration with stakeholders to address these issues once it realized progress was lacking. (For 36

49 further details on results in specific sectors and the government s budget allocations during the first PRSC/G series, refer to Annex 8.) 6. Lessons Learned (both operation-specific and of wide general application) 58. Key lessons learned under the first PRSC/G series in Rwanda include: General Budget Support is General Budget Support. As evidenced by the allocation of expenditures under GoR s budget over the period of the first PRSC/G series, the nominal amount allocated to the social sectors (education, health) and agriculture increased due to the overall increase in public expenditure both in nominal and real terms (domestic resources increased steadily while external resources increased, but with less consistency), accompanied by an increase in GDP over the period. However, the share of the budget allocated to these sectors remained steady (with small increases as a proportion of GDP and total expenditures for health and agriculture) or decreased slightly (as in education). Only infrastructure and land and resources under MININFRA and MINITERE, respectively, saw allocations increase with slightly more significance, of which energy, transport, and water and sanitation benefited. The intense dialogue on these sectors under the PRSC/G series served to protect expenditures in these areas, but in real terms no significant increase in the proportion of the budget dedicated to them can be noted. However, if looking at the allocation of the increase in budget spending compared to the increase in spending for the specific priority sectors, a large portion of increased expenditures between 2004 and 2007 did benefit these priority sectors (67 percent), with infrastructure benefiting the most, as shown in Table 8. Table 8. Allocation of Public Expenditures in Key Sectors, % of sector's share of total increase in Recurrent % of sector's share of total increase in Developm % of sector's share of total increase in TOTAL Nominal Terms Education 25% 15% 21% Health 8% 19% 13% Agriculture 2% 6% 4% Infrastructure (incl. Energy) 14% 29% 21% Land & Natural Resources (incl WSS) 2% 22% 10% TOTAL Ministry' Share 51% 91% 67% Note: % calculated based on sector increases in public expenditures as % of tot overall increase in public expenditure General budget support, by definition, cannot be earmarked for specific sectors. However, there was success under the PRSC/G series in influencing GoR to reallocate within sectors for example, shifting spending from tertiary to primary level programs (although primary education is still below 50 percent, reallocation has been large). In the case of Rwanda, ongoing dialogue was a valuable part of ensuring steady (rather than decreased) spending in 37

50 priority sectors (The report for which the table of contents is shown in Annex 8 provides much greater detail and analysis of resource allocations by the GoR during the period). PRSC/Gs Support Infrastructure Successfully. The infrastructure sub-sectors of water and energy were successfully supported as part of the service delivery agenda under the first PRSC/G series. Elevating the dialogue on these sub-sectors allowed donor partners and GoR to address policy issues more efficiently and effectively than had been the case exclusively through projects. Sector priorities support for local level private operator schemes in water, extra electricity generation capacity in energy that were not being fully addressed through projects received support under the PRSC/G series. Inclusion in the PRSC/G series also forced these sub-sectors to examine weaknesses in sector strategies, policy frameworks, MTEFs, and planning and budgeting, and established a foundation for, or accelerated, donor cooperation and the move to sector-wide approaches. Following a similar pattern, policy dialogue on the transport and social protection sectors was included in later stages of the PRSC/G series. Frank, Upfront Dialogue is Key. The delays experienced in the adoption of the Procurement Law demonstrated the need to engage in open, frank dialogue at an early stage of a reform program. GoR, while appreciative of the final product, indicated that the process of drafting the Procurement Code could have been simplified had the Bank been clearer on expectations at the outset and then provided more continuous support to help GoR achieve stated objectives. Continuity of a Strong Bank Team Makes a Difference. In large measure, members of the Bank team including the Task Team Leader and sector specialists remained the same over the course of all three PRSC/Gs in the series. While this is unfortunately more often an exception rather than the rule, continuity in team leadership and team members was a contributing factor to the success of the program. GoR strongly highlighted the impact that team continuity had on the exceptionally robust dialogue between GoR and the PRSC/G team. Such continuity facilitated the building of strong relationships and trust and understanding amongst all parties and allowed for consistent follow-through on the agreed reform program. PRSC/Gs Promote Donor Coordination But the Bank Needs to Be Sensitive. The process of preparing the operations under the first PRSC/G series was instrumental in facilitating donor coordination and collaboration, and alignment with the GoR s budget cycle. By the third operation, trust among donor partners and between donor partners and GoR had been built. However, the Bank could have been more sensitive in regard to existing budget support donors from the outset, when the Bank first decided to move to provide budget support. Cross-Sectoral Linkages and Synergies Should be Captured. While significant progress is evident within sectors, more work is needed to strengthen cross-sectoral linkages. The health and water sectors have taken steps to coordinate their efforts (e.g., clean water for good health), but much more needs to be done to capture synergies between sectors. Strong Stakeholder Commitment is Critical. The PRSC/G series demonstrated that substantial outcomes can be achieved with strong commitment on the part of government and with Bank support designed to develop the needed capacity for implementation. This is particularly evident in the education, health, water and agriculture sectors. PRSC/G I started off with 38

51 substantial focus on capacity support for development of sector strategies and MTEFs, with attention to the resource constraint and an assessment of trade-offs and various options to reach targets in the education and health sectors. Support provided by the Bank (working closely with key donors) in these areas greatly facilitated the move toward a SWAp in the education sector, and provided an example for similar discussions/arrangements in the health and water sectors. Discussions to move to a SWAp in the agriculture, transport, and energy sectors were also initiated over the course of the series. The experience with the social sectors indicates that substantial improvements in access to services in the infrastructure sectors will require substantial capacity support toward sector strategy development, planning, and MTEF development. Design of Decentralization and Civil Service Reforms Must Consider Existing Institutional Capacity Constraints. GoR should be commended for the successful way in which it has carried out the first phase of its comprehensive civil service reform program (with support from DFID), including large retrenchments. However, in the short-term it has further diminished the already taxed capacity of central and local government ministries and agencies. With the move to decentralize undertaken in this context, capacity constraints became even more evident, for instance in the infrastructure sector where local-level support was lacking. Hiring of local infrastructure officers, accountants and auditors for districts, and so on was quickly pursued by GoR, but this could have been planned more systematically in advance. In the second phase of its civil service reform GoR, while it competitively recruits and trains candidates for new positions, is working with its donor partners to ensure that the capacity building needs of central ministries and agencies as well as districts capacity needs are met. Sound Joint Analytical Work is Important to Inform Policy Dialogue and Reforms. Development partners conveyed in July 2007 as part of the Bank country office consultations on conditionality and Bank policy operations that the Bank needs to ensure that all stakeholders are consulted and own outcomes of joint analytic work. Although the first PRSC/G series played a significant role in improving coordination of development partners, including the undertaking of joint analytical work (most notably in the area of public financial management), this enhanced collaboration to further inform policy dialogue and reforms to support and encourage joint analytical work with other donors and with government needs further attention in the second PRSG series. Transaction Costs Can Be Lessened and Outcome Ownership Enhanced with a Harmonized Accountability Framework Aligned Around Policy Objectives. Following consultations on conditionality and Bank policy for the preparation of the second PRSG series, GoR noted that the Bank s support (and that of other donors) still entailed transaction costs and a move toward a lean and harmonized accountability framework based on the EDPRS will significantly lessen the problem and improve ownership. Results of the consultation indicated the need to have more focused, streamlined, and enforceable benchmarks. It was suggested that a Common Performance Assessment Framework (CPAF) was needed around the EDPRS. The consensus was to ensure that the CPAF is government-driven, widely consulted on, endorsed by key stakeholders, and focused on the critical success indicators, which would translate to a significant reduction in transaction costs, ensure smooth implementation and sharply increase the strength of dialogue between GoR and development partners. 39

52 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 62. Overall, GoR expressed extremely positive feedback on the PRSC/G series and the Bank s support. Areas of challenges noted by GoR included the energy crisis, which involved difficult policy choices but under which the World Bank played a significant role by quickly adjusting priorities to help facilitate a rather fast recovery, and during the dialogue on procurement, in which GoR found World Bank guidance unclear and insufficient. Box 3 highlights key messages from GoR on factors contributing to the success of the PRSC/G series (for further details, see the Borrower s ICR in Annex 4). Box 3. Summary of GoR s Feedback on the First PRSC/G Series: Key Success Factors Government Commitment. The overarching factor contributing to the success of the program was GoR s commitment to reform. This was reflected in terms of resource allocation in the budget (which remained steady over the time period) to the key sectors of focus under the PRSC/G series and in GoR s efforts to improve financial and procurement management and the introduction of innovative programs. Early Disbursements. The Bank s commitment to early and predictable disbursements of funds made budgeting easier for GoR and also encouraged other donors to follow suit. By 2007 all major budget support donors agreed to disburse no later than the second quarter of Donor Harmonization and Coordination. The introduction of the biannual Joint Budget Support Reviews and sector reviews on the initiative of the World Bank streamlined donor discussions, reduced transaction costs for GoR in dealing with development partners, and improved the overall donor harmonization and aid alignment agenda Strong Consultative Dialogue and Technical Support. World Bank consultative and technical support under the PRSC/G series, and particularly in regard to GoR s major decentralization efforts (including the introduction of IMIHIGO contracts) was critical. Decentralization supported earmarked and block transfers to districts and the strengthening of the quality of service delivery at local level, an agenda to which the PRSC/G series was fully aligned. Improved Public Expenditure Management, Accountability, Transparency. The PRSC/G series was instrumental in helping GoR achieve its goals in improving planning, budgeting, and financial reporting, including the introduction of results-based MTEFs in key sectors (e.g., health, education, water) the alignment of district MTEFs to national programs, and completion of PETS and PERs in key sectors. Flexibility of Budget Support. GoR attributes some of its success in tackling the 2004 energy crisis to the PRSC/G s support and flexibility. PRSC/G support to the energy sector was redefined and realigned to address the unexpected crisis, and budget allocations were likewise adapted according to needs and priorities in real time. As such, by 2005 the crisis was largely under control, much faster than many of Rwanda s neighbors facing similar energy challenges. (b) Cofinanciers 63. Comments from donor partners interviewed were largely positive regarding the experience with the first PRSC/G series. Those interviewed pointed to the building of government capacity, improved budgeting and planning, and closer donor coordination and collaboration forged through the process. The introduction of Joint Budget Support Reviews was considered a key achievement, it was noted that the reviews need to be more focused. There were frank comments in regard to the difficult areas of procurement and energy sector dialogue under the first PRSC/G series. Some donor representatives indicated that at the start of the PRSC/G series, the Bank could have been more sensitive to existing budget support donors/gor s large donor partners although over time the dialogue was strengthened. Donors suggested that the Bank should put in place a more 40

53 systemic mechanism for document sharing so that they are easily accessible to all partners. In reflecting on why more progress was made in the water versus energy sector, officials indicated that MDG targets helped the drive toward results in water, which galvanized donor support. Another difficult area was the ongoing discussion on budget allocations to primary versus tertiary sub-sectors in education and health, but overall the feedback from donor community was positive. (For further feedback, refer to Annex 5.) (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 64. Box 2 above summarizes beneficiaries feedback. For more details also refer to Annex 2. 41

54 Annex 1. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members PRSC/G I: Name Title Unit Unit Agnes Soucat, Lead Economist and Team Leader (AFTHD); Kene Ezemenari, Sr. Economist, Guido Rurangwa, Sr. Country Officer, Brendan Horton, Lead Specialist (AFTP3); Mohamed Toure, Operations Adviser, Kampeta Sayinzoga, Team Assistant (AFC09); Sidi Jammeh, Rural Sector Specialist (AFTS3), Susan Opper, Sr. Education Secialist, Miriam Schneidman, Sr. Health Specialist, Toni Kayonga, Operations Officer, Nathalie Lopez-Diouf, Program Assistant, Therese Tshimanga, Team Assistant (AFTH3); Jee-Peng Tan, Adviser, Mamy Rakotomalala, Education Specialist, Alain Mingat, Education Specialist (AFTHD); Malcolm Cosgrove-Davies, Sr. Energy Specialist, Nikhil Desai, Energy and Environmental Economist (AFTEG); Deo-Marcel Niyungeko, Municipal Engineer, Christophe Prevost, Sr. Water and Sanitation Specialist, Richard Verspyck, Lead Water Supply and Sanitation Specialist, Johannes G. Grijsen, Sr. Water Resource Management Specialist (AFTU2); Prosper Nindorera, Sr. Procurement Specialist (AFTPC); Joseph Kizito Mubiru, Sr. Financial Management Specialist (AFTFM); Negda Jahanshahi, Economist (OPCPD); Allison Berg, Operations Officer (OPCCE); Henry Chase, Policy Writer (OPCOS). Peer Reviewers: Shantayanan Devarajan, Chief Economist, Philip Goldman, HD Specialist, Anne M. Pierre-Louis, Lead Health Specialist, Stefan Koeberle, Operations Support Director, Satu Kristiina J. Kahkonen, Lead Economist. PRSG II: Name Title Unit Specialty Agnes Soucat, Lead Economist and Team Leader (AFTHD); Kene Ezemenari, Sr. Economist, Guido Rurangwa, Sr. Country Officer, Brendan Horton, Lead Specialist, Raju Kalidindi, Research Assistant (AFTP3); Mohamed Toure, Operations Adviser, Kampeta Sayinzoga, Team Assistant, Toni Kayonga, Operations Officer (AFC09); Sidi Jammeh, Rural Sector Specialist, Liz Drake, Rural Development Specialist (AFTS3), Susan Opper, Sr. Education Specialist, Miriam Schneidman, Sr. Health Specialist, Mamy Rakotomalala, Education Specialist, Menahem Prywes, Sr. Economist, Therese Tshimanga, Team Assistant, Nathalie Lopez-Diouf, Program Assistant (AFTH3); Jee-Peng Tan, Adviser, Alain Mingat, Education Specialist (AFTHD); Malcolm Cosgrove- Davies, Sr. Energy Specialist, Nikhil Desai, Energy and Environmental Economist (AFTEG); Deo-Marcel Niyungeko, Municipal Engineer, Christophe Prevost, Sr. Water and Sanitation Specialist, Richard Verspyck, Lead Water Supply and Sanitation Specialist, Johannes G. Grijsen, Sr. Water Resource Management Specialist (AFTU2); Prosper Nindorera, Sr. Procurement Specialist, Pierre Morin, Sr. Procurement Specialist, Chantal Kajangwe, Procurement Analyst (AFTPC); Joseph Kizito Mubiru, Sr. Financial Management Specialist (AFTFM); Michael Fowler, Sr. Finance Officer, Agnes Albert-Loth, Sr. Finance Officer (LOAG2), Negda Jahanshahi, Economist (OPCPD); Allison Berg, Operations Officer (OPCCE); Kai Kaiser, Sr. Economist (PRMPS); Pablo Gottret, Health Lead Economist, Samantha Naidoo, Investment Officer (HDNHE); Arleen Cannata Seed, Sr. Information Officer (ISGIF); Sameena Dost, Sr. Counsel (LEGAF). Peer Reviewers: Shanta Devarajan, Chief Economist (SARVP), Chukwuma F. Obidegwu, Lead Economist (AFTP3), Shekhar Shah, Economic Advisor (SARVP), Dana Weist, Lead Public Sector Specialist (PRMPS). 42

55 PRSG III: Name Title Unit Responsibility/ Specialty Agnes Soucat, Lead Economist and Team Leader (AFTHD); Kene Ezemenari, Sr. Economist, Maburuki Bahati Tembo, Country Economist, Kalamogo Coulibaly, Economist, Mireille Linjuoum, Economist (AFTP3); Bruno Boccara, Lead Economist (AFTP4); Mohamed Toure, Operations Adviser (SACBD); Toni Kayonga, Operations Officer, Liz Drake, Rural Development Specialist (AFTS3), Sylvie Ingabire, Program Assistant (AFMRW); Susan Opper, Sr. Education Specialist, Verdon Staines, Social Protection Specialist, Alex Kamurase, Operations Officer, Therese Tshimanga, Team Assistant, Nathalie Lopez-Diouf, Program Assistant, Nadège Nouviale, Program Assistant (AFTH3); Annika Kjellgren, Consultant, Kinston Khan Apara, Sr. Transport Specialist (AFTTR); Jee-Peng Tan, Adviser, Negda Jahanshahi, Economist (AFTHD); Malcolm Cosgrove-Davies, Sr. Energy Specialist, Nikhil Desai, Energy and Environmental Economist (AFTEG); Deo-Marcel Niyungeko, Municipal Engineer, Christophe Prevost, Sr. Water and Sanitation Specialist (AFTU2); Stefanie Teggeman, Public Sector Specialist, Zoe Druilhe, Project Coordinator (AFTPR); Pierre Morin, Sr. Procurement Specialist, Chantal Kajangwe, Procurement Analyst (AFTPC); Joseph Kizito Mubiru, Sr. Financial Management Specialist (AFTFM); Renee Desclaux, Finance Officer (LOAG2); Allison Berg, Operations Officer (COCPO); Kai Kaiser, Sr. Economist, (PRMPS); Pablo Gottret, Health Lead Economist, Owen Smith, Young Professional (HDNHE); Arleen Cannata Seed, Sr. Information Officer (ISGEG); Sameena Dost, Sr. Counsel (LEGAF); Rogers Kayihura, Communications Officer (AFREX). Peer Reviewers: Shekhar Shah, Senior Advisor (SARVP); Chukwuma Obidegwu, Lead Economist (AFTP3); Nancy Benjamin, Sr. Economist (AFTP4). 43

56 (b) Staff Time and Cost (from SAP) Staff Time and Cost (Bank Budget Only) Stage No. of Staff Weeks US$ Thousands LENDING PRSC/G I (P085192) FY , (13, for travel) (89, for labor) PRSG II (P092944) FY , (43, for travel) (76, for labor) FY , (65, for travel) (114, for labor) PRSG III (P098129) FY , (61, for travel) (139, for labor) FY , (74, for travel) (127, for labor) TOTAL LENDING: , SUPERVISION/ICR PRSC/G I FY , (51, for travel) (102, for labor ) FY , (67, for travel) (59, for labor) PRSG II FY , (46, for travel) (86, for labor) FY , (26, for travel) (11, for labor) PRSG III FY , (114, for travel) (138, for labor) FY (11, for travel) (77, for labor) TOTAL SUPERVISION: , GRAND TOTAL ,598,

57 Annex 2. Beneficiary Survey Results The following Annex provides a summary of the results following beneficiary surveys and interviews. The results of these surveys are being used to determine progress and impacts under the first PRSC/G series and to inform the design and implementation of the second PRSG series. The surveys include: (a) Interview of beneficiaries Performance Based Financing & Mutuelles (Health Sector): CASE STUDY: MUTUELLES; Gahini District Hospital, Eastern Province CASE STUDY: MUTUELLES AND PERFORMANCE-BASED FINANCING; Rukara Health Center, Eastern Province (b) Interview of beneficiaries Local Government: CASE STUDY: RULINDO DISTRICT; Progress & Challenges Following Decentralization, 2006 to Present (c) Interview of beneficiaries Primary & Secondary School Education Experience & Parent Teacher Association s experience with Capitation Grant: CASE STUDY: CAPITATION GRANTS & PARENT TEACHER ASSOCIATIONS; Nyamata Catholic Primary School & Ecole Secondaire Kanzenze & Parent Teacher Association in the Nyamata Sector in District of Bugesera, Eastern Province. (d) Interview of beneficiaries Water & Sanitation Project: CASE STUDY: HUYE DISTRICT; PRSC/G supported Private-Public Partnership (PPP) Rural Water Supply & Sanitation Project (RWSSP) Successful Completion reaching 20,000 beneficiaries (e) Interview of beneficiaries Results from the Citizens Report Cards (CRC) & Community Score Cards (CSC): ABSTRACT: Rwanda Citizens Report & Community Score Cards report, December

58 (a) Interview of beneficiaries Performance Based Financing (Health Sector) & Mutuelles (Health Insurance Scheme) CASE STUDY: MUTUELLES Gahini District Hospital, Eastern Province Name of Person(s) Interviewed Organization Dr Bonane Gahini District Hospital, Eastern Province Date of the interview Wednesday, March 13, What was the pace and degree of implementation, including sequencing and relationships to other strategies? 2. Where did the ideas and the impetus for the strategy come from: local, national, international sources? 3. How has the implementation of the strategies under review been organized and managed, including political advocacy and management? Reimbursement mechanism. When a patient comes from another health district (i.e., his mutuelle card belongs to another health district), the hospital provides him with the health services he needs. The mutuelle of the hospital sends the invoices to the district and asks to be reimbursed. 4. What factors in the health sector and in the broader macro environment enabling and inhibiting conditions - have influenced adoption, implementation, and outcomes? Inhibiting conditions It takes time to change people s habits. For instance, traditional birth attendants are still assisting women with births at the community level. Enabling conditions - Very strong political commitment of local authorities. They advocate about the benefits the population will get from mutuelle membership. - Local authorities are committed to support indigents so that most of the population is covered by a mutuelle scheme. - Slow increase of households income. - The MoH and the GoR provided a lot of valuable input to support the implementation of the policy: increase in salaries, ambulances, decentralization - Imihigo (performance contract between the President of Rwanda and mayors). The mutuelle coverage rate is one of the targets of the contract so authorities at several levels are committed to make the coverage rate as high as possible. 46

59 - Contract between the district hospital and local authorities on outcomes. The district hospital is motivated to find ways to increase membership of mutuelle schemes and to encourage the population to seek care at public health facilities. - The increase in health outcomes is related to: o Mutuelle membership o Strategies aiming to reduce risks during pregnancy. For instance, if a woman is at risk, she can be admitted at the district hospital one or two weeks before the delivery. o Ambulances pick up women who need to go to the health center or to the hospital to deliver. 5. What results have been achieved? Since mutuelles were implemented, health outcomes at the district hospital level improved a lot. In Gahini, the mutuelle coverage rate is 86 percent (2008). Utilization rate of health services: Before mutuelles were implemented, the rate was around 15 percent. Now it is around 80 percent. This important increase shows that people who became members of the mutuelle decided to seek care to public facilities instead of to traditional healers or private facilities as they now get reimbursed for services delivered at public health facilities. Financial access to health services improved. The entire population can now afford to seek care at health centers and hospitals; the indigents receive financial support. Assisted deliveries: 15 percent of women in ; 75 percent of women in Are there discernable intended or unintended benefits to the poor? Indigents are given a mutuelle membership card and the co-payment (ticket moderateur) is paid by the National Risk Pooling Basket. PERFORMANCE-BASED FINANCING (PBF) 1. What was the pace and degree of implementation, including sequencing and relationships to other strategies? 2. Where did the ideas and the impetus for the strategy come from: local, national, international sources? 3. How has the implementation of the strategies under review been organized and managed, including political advocacy and management? Advice to districts that will be implementing PBF soon: 47

60 - To implement PBF, requires a change in working habits so that individuals get used to being evaluated. - The evaluation process is very time consuming and requires work from all actors within the hospital. Implementation of PBF within Gahini hospital: - First level: Monitoring of health centers within the district (13) with specific tools to evaluate the quality and quantity of health services provided at the health centre level. During these monitoring sessions, the hospital also intends to train health care personnel and make familiarize them with PBF. - Second level: Peer review of the quality of health services delivered at the district hospital level. The peer reviewers come from the central level and from four other hospitals within the region). They use a specific tool to evaluate the performance of the hospital. The reviewers pay attention to the management of the hospital, the quality of health services, clinical activities and HIV/AIDS activities. According to the hospital s performance regarding these issues, the hospital is given a rank and receives money in relation to its performance. At the beginning, this process was difficult to implement at the hospital level but now the hospital is used to it and knows how to improve the quality of services provided. Now it has reached a good ranking and its objective is to maintain its current level of PBF transfers and quality of care. Use of PBF transfers at Gahini s Hospital Level: - The hospital usually receives quarterly payments between RwF 5 million and RwF 16 million. Although the central government sends guidelines on how the transfers should be spent (i.e., 25 percent of the transfers should be allocated to cover running costs), the district hospital can allocate these funds according to its needs and priorities. In Gahini District Hospital, 40 percent of PBF transfers cover running costs and the remainder is allocated to training and bonuses for health personnel. A specific PBF for HIV/AIDS related activities is also managed within the hospital. The evaluation is related to HIV/AIDS indicators and the hospital receives separate quarterly transfers according to its performance. A steering committee (comite de pilotage) was set up at the district level to: prevent corruption and bad governance; serve as an intermediary between the central level and the operational level (hospital). This steering committee is accountable for what is being done at the district level. 4. What factors in the health sector and in the broader macro environment enabling and inhibiting conditions - have influenced adoption, implementation, and outcomes? o Inhibiting conditions 48

61 o Enabling conditions o Strong commitment of local authorities. o The hospital is accountable for health outcomes within the districts. o Strong commitment of the MoH to improve the quality of health care services. Many MoH monitoring activities at all levels. o Lots of political, local, and social pressure to ensure good quality services. o The director of the hospital is held accountable by the population, the local authorities and MoH. o A cycle of motivation: as the hospital needs more money, it does its best to improve health outcomes, and therefore its PBF transfers increase. With more money, the hospital can achieve better results (more physicians for instance working in the hospital). 5. What results have been achieved? Additional staff paid with PBF money. In 2004, there were two physicians working in the district hospital. In 2006, there were six physicians out of which two were paid with PBF transfers. As far as nurses are concerned, there were 10 A1 and A2 nurses in 2004 and 37 currently. Infrastructure. Thanks to PBF transfers, the district hospital bought 100 beds (RwF each), rehabilitated the buanderie and improved sanitation in the yard. Bonuses for health personnel. Part of the PBF transfers is for bonuses of the health personnel working in the hospital. CASE STUDY: MUTUELLES AND PERFORMANCE-BASED FINANCING Rukara Health Center, Eastern Province Name of Person(s) Interviewed Organization Date of the interview Sister Theresa, Director of the health center Alphonsine, responsible for the mutuelle section Rukara Health Center, Eastern Province Wednesday, March 13, What was the pace and degree of implementation, including sequencing and relationships to other strategies? 2. Where did the ideas and the impetus for the strategy come from: local, national, international sources? 49

62 3. How has the implementation of the strategies under review been organized and managed, including political advocacy and management? A team comes every month to evaluate the performance of the health center (through PBF). The health center receives quarterly transfers from about RwF 1 million to 1.6 million from the PBF. The implementation of the PBF strategy at the level of the health center is difficult because it gives more work to the health center and the health center has no financial and human resources to improve its ranking. Therefore, it does not get a lot of money from it. 100 percent of the PBF transfers are used to pay bonuses of health personnel. 4. What factors in the health sector and in the broader macro environment enabling and inhibiting conditions - have influenced adoption, implementation, and outcomes? Inhibiting conditions - Mutuelles create a lot of work in terms of management. There is a person who is working full time on invoices. Since the mutuelle section was set-up in the health center (located in the health center but independent), the health center is paying two persons full-time to deal with mutuelle-related issues. - The district is supposed to provide furniture for the health center but it does not. For instance, the health center has not had mutuelle cards since November 2007 and the mutuelle has to make cards on small pieces of paper. - The prices of health services (set up by the MoH) have recently increased a lot. This causes financial difficulties at the health center level as it creates difficulties in terms of reimbursement (the price of each service increased but the contribution to the mutuelle remained the same). Enabling conditions 5. What results have been achieved? 92 percent coverage at the mutuelle section of the health center in percent coverage in 2008 because some people haven t applied yet for the membership this year. All health services are free (co-payment of RwF 200). Essential Medicines (from the national list) are free. Increase in utilization of health services and decrease in child mortality. 6. Are there discernable intended or unintended benefits to the poor? Partners such as the Global Fund, Gacaca, FARG, and Caritas are paying the mutuelle membership fees for indigents. The local administration is in charge of identifying indigents. 50

63 DECENTRALIZATION OF HUMAN RESOURCES Since January 2008, the Ministry of Finance sends directly the salaries of nurses paid by the government to the health center. However, the health center hasn t received any money yet so Sister Theresa had to pay upfront the salaries of the 3 nurses usually paid by the government. The health center level does not understand the objective of decentralizing the salaries as it creates more work than anything. 51

64 (b) Interview of beneficiaries Local Government CASE STUDY: RULINDO DISTRICT Progress & Challenges Following Decentralization, 2006 to Present This case study is based on data from the District of Rulindo and a group interview on April 16 th 2008 with Vice Mayor of Economic Affairs, Mzamwita Deo; Director of Good Governance, Rutware Joseph; Director of Health, Gender & Children, Fecericie Uwamurera; Director of Land, Urbanization, Habitat, & Infrastructure, Joseph Manzi Migeri; Planning Officer, Augustin Dusengimana; District Land Officer, Teophile Mutanganda; and Director of Finance, Emmanuel Rutaremara. Introduction The district of Rulindo is located north of the city of Kigali, in the Northern Province. As part of the decentralization process in 2006, Rulindo was created as a district out of three provinces from (Kigali-Nigali, Byumba, and Ruhengeri). Although Rulindo is located only about 60 minutes from the City of Kigali it is considered a rural district and lacks much of the benefits of the urbanization that exist in Kigali City and its surroundings. Rulindo is home to 261,000 people of Rwanda s total population of 9.2 million. 92 percent of the population lives off of agriculture, and 38 percent live under extreme poverty. Of the GoR s transfers to districts in 2006 and 2007, Rulindo received about 3 percent of the total transfer. The range of transfers to districts as percent of total transfers ranges from 1 percent to 5 percent between the 30 districts. Since the reorganization that followed the decentralization in 2006, Rulindo together with all other districts in the country, have seen many changes. For example, since 2006 the districts MTEF has been streamlined and through this process, the 2008 MTEF is now streamlined with the GoR s programs. This improvement followed after GoR worked closely with districts to develop an MTEF that both reflected needs on the ground in the districts and the needs of aligning budgeting, planning, and reporting to policy objectives and to GoR s central-level programs. Rulindo, together with all other districts, took part in a major workshop in May 2007 that was facilitated by the World Bank where the districts were given a voice in the proposed new MTEF. Speaking to officials in the districts, the process and the improvements seen by the new MTEF have been welcomed. Rulindo has also been selected to participate in many piloting programs, several of which are now scaled up on a national level. That includes mutuelles, Imihigo, Ubudehe, Umuganda, Ibimina, HIMO and other pilot programs, several of them having been scaled-up on national levels. The district reports that the introduction of IMIHIGO, the contract between the President and the district, has proven a tremendous incentive for the district and its representatives to mobilize itself and commit itself to meeting its objectives. District officials speak of the contract as a source of inspiration that has helped create a sense of competitiveness amongst districts and within its own administration, hence both creating ownership in the process and progress and pride as the district manages to improve in various areas. 52

65 The following section will look at (i) Rulindo s different sectors to provide a sense of the district s progress to date compared to Rwanda overall, (ii) to review the planning processes, funding of sources, funding allocations and expenditures in the district for some of the key sectors (iii) to highlight successes and remaining challenges in the district. 1 - Rulindo Sector Review Health Sector Rulindo currently has 17 health centers and one hospital, the Rutongo Hospital, which together employ 154 nurses and six doctors. Following the introduction of mutuelles, the coverage rate in the district is now at 95 percent (2007), the second highest coverage rate in the country following district of Gasabo, and 51 percent compared to the national average. The district also provides assistance for those households that cannot afford to pay for mutuelles. Last year the district supported 26,500 (10 percent) vulnerable families to pay for mutuelle coverage. Coverage of assisted deliveries has increased and was at the end of 2007 at 39 percent, up from 37 percent in 2006, and estimated assisted deliveries from 2008 are expected to reach 42 percent, above the current national average of 39 percent. The introduction of bed-nets have also significantly decreased the deaths related to malaria, and around 29,200 families are currently using bednets, about 70 percent of the total population compared to a national average of 40 percent in 2006 (estimated to have increased to 60 percent by 2007). Furthermore, 85 percent of the districts children have been vaccinated. Education Sector Rulindo currently has 78 primary schools (one is private), 12 trunk commun schools, and 22 secondary cycle schools (22 public and 5 private). Furthermore, Rulindo has two technical/vocation training centers, but does not have any youth centers or sport centers. The districts teacher/student ratio in primary school is at 56:1, below the national average of 71:1. Infrastructure Sector Public Markets: Rulindo constructed two new markets last year, and three more are under construction for 2008; the longer-term plan is to complete 19 markets to meet the district s need, depending on future available resources being made available mainly though transfers such as the Common Development Fund (CDF). Bridges & Roads: The district has 783 bridges of which 496 are considered in bad condition. The district furthermore possess 42 kilometers (km) of roads in good conditions while 868km are in bad conditions or non-existing. Water & Sanitation: The district has 160 water tanks and 838 public water taps and while 40 percent of the population have access to clean water (below national average according to Water Supply and Sanitation PER, 2006) 65 percent has access to proper sanitation, above national average. The district reports that water and sanitation has seen major improvements in the last couple of years, primarily thanks to five newly constructed canals. Energy: The district use solar energy to power six of its secteur offices. In terms of electrical power, the district has 850 km of electrical supply. Coal can be found in the Bahimba swamp but is currently not being utilized. Firewood is instead commonly used in the district but the price is high (one stere costs RwF 4,000). Also, biogas is used in one secondary school in Shyorongi, Stella Matutina. In general the district reports that it does not in general experience blackouts and the price from ELECTROGAZ is standardized. Prisons: The district does not have a prison. The greatest needs in the infrastructure domain include road 53

66 rehabilitation, improvements in water supply, and school buildings. Furthermore, the district needs funding for its project of building the Kinihira Hospital, two new health centers, and four socalled health posts. Furthermore, the district is lacking a proper district head quarter and secteur and cellule offices. Agriculture The average hectare (ha) per family in Rulindo is 0.67 ha. The GoR has initiated some programs to improve the district s agricultural sector, including land consolidation, agro-forestry, soil erosion protection, PSTA (Plan Strategique de Transformation Agricole), and initiatives aligned with the EDPRS. The district reports that many changes have occurred since 2006 although many challenges remain. For example, the district reports that it has seen an increase in the number of technicians in its sectors, but the lack of capacity still remains. Rulindo has constructed 1,360 ha of radical terrace and 1,960 water poles, but soil erosion remains a major problem and even if progress in terracing has been made, much more work is needed to sufficiently address the problem. Other improvements include the protection of 60 percent of land, modernization of harvest systems, and implementation of HIMO activities in 3 sectors, so-called food-for-work programs for terracing. Also, the district faces challenges with traditional livestock although the GoR s One-Cow-Per-Family program has brought 40,000 new cows of better breed to the district as of Sectors who receive some funding as well have chosen to provide 130 pigs to each sector. Other challenges within the agriculture sector in the district includes the lack of technicians, weak income from agricultural production and harvest caused to lack of manure, and limited land to be utilized for purposes of agriculture and harvesting. Currently, the district reports that this sector and related climate changes issues remain under-funded. Social Protection Program The District of Rulindo supports several social protection programs, support of genocide survivors, orphans and vulnerable children, and families too poor to pay school fees and/or mutuelles. Genocide Survivor support: Rulindo has built 223 houses to date for genocide survivors. It also helps pay school fees and mutuelle for genocide survivors. Orphans and Vulnerable Children Support: Rulindo pays school fees for vulnerable children, help integrate them to families, and supports them by paying mutuelle. Education Fund Support: In 2006, over RwF 14 million of district funds to assist student of poor households to pay for school fees. In 2007, RwF 24.8 million was used for the same purpose. Public Works Support: Public work has decreased in the district but own initiatives, including private sector initiatives are being pursued. The role of the Ubudehe program have helped address the issue of poverty and rural development and the district reports that the program is deemed successful and has helped empower citizens to solve their own community problems. Productive & Private sectors Productive sectors remain small. The district only has one mining site, Masoro. The district lacks markets where its citizens can conduct commerce. Last year 2 new markets were constructed and three more constructions are planned for the year However, the district plans on eventually having 19 markets to cover its need in the district, a plan that is currently heavily dependent on future funding. Furthermore, the district has some key industries that are providing valuable job opportunities. For example, it has a large tea factory and with a large tea plantation. Only three to four districts in the country have similar tea production. The district also has a coffee washing 54

67 station and a major juice producing factory, one of the largest in the country. This factory is evidence of the important of access to capital as the factory, SINA Gerard, was started with funding from Banque Rwandaise de Developpement and with a tax break from GoR that helped the company off the ground and currently employs about 4,000 people in the district. Besides juice, the company has developed and is selling several other products, such as cassava powder and other food products. 2 Planning Processes, Funding Sources, Allocations, and Expenditures Comments on Budget Reforms & Plans Districts are required to submit a five-year District Development Plan, and its three-year plan (MTEF), and annual Action Plans. In the years following decentralization, the district reports that the planning processes have improve and that MTEF changes and related budget reforms have been welcomed. However, the district also reports that the MTEF being submitted to GoR for approval of funding and the MTEF actually being implemented is different as insufficient funding requires reallocation of funds throughout the year. Civil Society & Joint Action Forum (JAF) The district of Rulindo currently has 28 members in it Joint Action Forum, including members from NGOs, cooperatives, faith-based organizations, and the district itself. Last year a coordination committee was elected (consisting of a president, vice president, council members, and a secretary) and the forum s first steps to an integrated district plan were taken. Last year, international NGOs contributions to district were for the first time reflected on the district s budget. Committees have been created to coordinate various initiatives in various sectors and collaboration is under way amongst all members to prepare next year s Annual Action Plan. Last year was the first time efforts were coordinated amongst JAF members to prepare a joint Action Plan; part of this first Action Plan included the organization of JAF itself. Today the JAF is coordinated around three committees: Committee for Good Governance; Committee for Social Affairs (includes health, education); and Committee for Economic Affairs. SNV, the Dutch NGO, has provided valuable support to the district in the efforts to establish the JAF. The district reports that the JAF has served the district well as it facilitates in the planning and budget allocation process and improved dialogue between the district and other stakeholders, such as civil society. However, greater collaboration is still desired and some stakeholders still are not fully engaged in the process. An additional problem encountered in the planning phase it that many faith-based organizations and local NGOs do not know the budget for the year, making budget allocation and coordination difficult. Transfers Block Transfers: Block transfers are non-earmarked funds from central government to support district s administrative work and facilitate in the district s day-to-day operations. Rulindo currently uses 70 percent of the funds to pay for wages and salaries for its staff and the remaining 30 percent to pay for different development programs that were not funded by the CDF or other sources of funds. The district reports that the block transfers are not sufficient to pay for all the needs of the district to run its operations effectively and efficiently and that local resources and revenues are not sufficient to make up for the difference. However, prior to reform the situation was significantly worse and the district reports that the ongoing dialogue between districts and 55

68 Ministry of Finance is good and that funding has increased over the period since decentralization. Earmarked Transfers: Earmarked transfers are being used for specific programs, such as capitation grants. The district reports that the earmarked transfers have been very successful and much has improved within certain areas thanks to the support of these earmarked funds. Common Development Fund (CDF): CDF funding serves an important function in supporting development projects, but the district reports that only half of the promised CDF funding is actually funded. Of the projects submitted to the CDF for approval each year, only some are selected and the district has to come up with other sources of funds to support its projects or the projects are put on hold. Vision 2020 Umurenge is seen as a welcomed initiative but it is noted that 50 percent of CDF funding going to districts will now be earmarked for Vision 2020 related initiative, further undercutting funding for other development projects. Currently CDF supported projects include: solar energy to six secteur offices; terracing; constructions of two roads; construction of two sector offices; construction of four bridges; and construction of two markets. The following projects have been submitted for approval for next year: infrastructure program, Ubudehe program, and a program for radical terracing. Revenue & Resources The district generates revenue through decentralized taxes, such as patent taxes, rental taxes, property taxes and other administrative charges. Also, a main source of resources is obtained from donors and central government. Although the district reports that a major challenge to the district is to effectively and consistently ensure that its limited tax base is paying its taxes and that its staff receives proper training, the district has still seen an improvement in ability to generate revenues since But still, revenue sources are unreliable as the district lacks a complete database of all tax payer base and delays in donor and GoR funds further hinders proper planning and budgeting of funds. Rulindo Budget Allocation Snapshot Rulindo allocated 12 percent and 30 percent of its recurrent resources in 2006 and 2007 to the health sector according to its MTEF, respectively. This was lower than the national average of 22 percent in 2006, but higher than national average of 24 percent in Rulindo allocated 33 percent and 12 percent of its recurrent resources in 2006 and 2007 to the health sector according to its MTEF. This is a higher that at national level (where GoR allocated 7 to 7.4 percent of recurrent expenditures in ). Rulindo allocated 5 percent and 2 percent of its recurrent resources in 2006 and 2007 to the infrastructure sector according to its MTEF. Although development spending data is limited, in percent of its MTEF development spending was allocated to infrastructure related projects. Major projects included were construction of class rooms and building of houses for genocide survivors and vulnerable families. About 2 percent of this spending went to energy-related projects. Rulindo allocated 10 percent of its recurrent resources in 2006 and 2007 to the agriculture sector according to its MTEF. This is a higher that at national level (where GoR allocates about 2 percent of recurrent spending). 3 Successes & Remaining Challenges at District Level: The Greatest Needs & Challenges The greatest challenges of decentralization at its initial phase included the increase in district responsibilities but with insufficient funds to fully and properly execute on those responsibilities. 56

69 Although this remains a challenge, the dialogue with government has led to increased funding in some areas, including block transfers, increased earmarked transfers, and in 2008 the addition of certain subsidies. But development projects remain under funded and the CDF funding is not sufficient to meet needs. As such, 30 percent of block transfers are currently being used to support under-funded development projects. Unpredictable expenses, such as expenses related to natural disasters, are hard to foresee and also often times put extra strain on the ability to execute properly. For example, following the earthquake in early 2007, several homes were destroyed. Severe flooding where 28 people died has also caused unexpected needs when over 35 households were destroyed. The district also needs further help to be able to train its staff properly. Urgent areas of capacity building needs include training in taxes and auditing. Progress & Improvements to Date Despite many challenges, the improvements since decentralization are noted in several areas. The IMIHIGO has served the district well, strong dialogue with government has led to improvements in certain areas including increased funding to support increased responsibilities on district level. Population in more fully engaged in its own decision making process on district, sector, cell and umudugudu (village) levels. Coordination has increased with central government and within the district itself and as such, processes have been streamlined. A simple, practical example includes the reduction of meetings that took away capacity from day-to-day implementation efforts. Sectors have been strengthened through increased financing and staffing capacity. Although many challenges still remain including lack of funding and lack of capacity, the overall feedback from the district is that the decentralization has been successful in empowering its population and its representatives, and as such, results in several areas in a short period of time since decentralization is clearly noted. 57

70 (c) Interview of beneficiaries Primary School Education Capitation Grant This case study is based on a field visit in the Nyamata Sector in the District of Bugesera, Eastern Province, and interviews on June 12 th 2008 with Vincent KAYINAMURA, Head Master Nyamata Catholic Primary School; Gaspard NKURUNZINZA, Head Master & Edith UWANYIRIGIRA (Perfect in Charge of Finance), Ecole Secondaire Kanzenze; and Said NIYONZIGAMA Male Student PTA Representative & Sandrine NIYONSABA, Female Student PTA Representative & Denise NYIRANSAZIMANA, Parent PTA Representative, Nyamata Catholic Primary School Parent Teacher Association. Nyamata Catholic Primary School & Parent Teacher Association: Nyamata Catholic Primary School currently has 1,183 students and 23 teachers (of which one is on a contractual basis paid for by the district). The teacher ratio for Primary 1-3 is 56 and for Primary 4-6 the ratio is 46, below the national average of 71. The school manages to keep the teacher ratio down by having its Primary 1-3 teachers work double shifts and when enrollment goes beyond a certain number, the school works with the district to see if some students can be transferred to neighboring schools. The school received 5,300 RwFr per student in 2007 as part of the capitation grant, an increase from previous years of which 2,500 RwFr went to pay for teacher bonuses to ensure quality of teaching and for teaching material. The remaining 2,800 RwFr per student was used for school maintenance and projects and to buy books and materials for students. Electricity: The capitation grant paid for the installation of electricity in the school which is a requirement by the district if a school is to be provided by computers for administrative use. In addition to requiring that a school has electricity, the district also asks for a contribution by the school in order to provide computers to management, which the school plans to use the capitation grant to do as well. Improved Hygiene & Environment: Furthermore, the school has used the capitation grant to create a culture of maintaining the school environment, including the creation of gardens around the school ground, the building of a fence around the compound, the plantation of trees, and the hiring of a guard to ensure that the school grounds are protected. Also, the school has a water tank which students and teachers can use to get clean drinking water. The tank itself was paid for by the World Food Program and the water source comes from a connection with Electrogaz for which capitation grant money is used to pay for the water service. Also, improved latrines have been installed at the school by the support from UNICEF and a catholic-based organization while the capitation grant is being used to ensure the latrines are maintained and cleaned. The school states that thanks to the capitation grant, the overall environment from hygiene and sanitation have improved significantly as the school now has the means to ensure that facilities and school grounds are regularly cleaned and maintained. Previously students had to clean the facilities themselves, including the latrines, while now workers are being paid to ensure the school s sanitary condition is maintained. Books & New Library: In addition, the capitation grant is used to pay for books that are not provided by UNICEF and MINEDUC. Both UNICEF and MINEDUC provide books to the school but not based on need so the capitation grant is used to by additional books. Although the school still cannot provide each student with its own book, the capitation grant has helped increase the 58

71 number of books available. For example, each desk (which has 3 students) currently has two books of each kind to share. The school would like to reach a point where it can provide each student with its own books. Also, the school is very proud of its new library which was made possible with capitation grant funding. Daily Meal & Lower Drop-out Rates: In terms of food, every student now eats a proper meal around noon. Before, most students only had breakfast. The World Food Program provides rice and corn and capitation grant helps buy other ingredients such as sugar. The introduction of a proper meal mid-day has helped lower drop-out rates due to hunger. Before the introduction of a mid-day meal, about 100 students out of 1000 dropped out; now only 5 out of 1000 students drop out. These remaining drop-out cases are no longer due to hunger but rather due to cultural problems of parents not understanding the value of education. Local leaders and PTA are addressing this issue. Mutuelles: Each student at the Nyamata Catholic School has mutuelle coverage which is paid by NGOs in the district (including World Vision, Compassion, Amani Great Lakes, and Save Rwanda). For those without support from NGOs, the school helps pay with help from capitation grant (currently the capitation grant supports 30 students). At the school, parents have to pay for uniforms only although at other schools such things as books and allowances may be included in costs for the parents. Improved Teacher Morale & Commitment: The school s head master reports that the higher bonuses (paid for by the capitation grant) have contributed to higher teacher morale and commitment. Many teachers now work extra, including evenings and weekends (this statement is also verified by the student PTA representatives). This is especially true among Primary 6 teachers. To hold teachers accountable, they have to report the school s and the teachers performance to districts on a regular basis but the school itself does not have the authority to fire teachers. Before, bonuses were paid out to teachers based on performance but currently, each teacher is paid their bonus in full regardless of performance. The head master admits that in some cases this guaranteed bonus could lead to less committed teachers but overall teachers morale and commitment remains high with the addition of bonuses through the capitation grant. Also, though the teachers are overall happy with the increased pay, they regularly inquire about the possibility of further increasing the amounts of bonus being paid quarterly. A teacher currently earns about 27,000 RwFr per month plus 36,800 RwFr per quarter in bonus. Combined Capitation Grant & UNICEF support: According to Nyamata Catholic Primary school, the capitation grant, in combination with the additional support from UNICEF, is currently sufficient to meet the schools most urgent needs. However, the primary school is only two out of ten in the sector that have additional support from UNICEF (with support in the form of material, building sport fields, etc.) As such, the school estimates that other neighboring schools may struggle to serve it students at the same level as Nyamata and the head master estimates that without the additional support from UNICEF, the school would need 2,000 RwFr more per student to maintain its current standards. Parent Teacher Association (PTA): PTA s main role is to make sure the teaching processes and the quality of learning is maintained, that teachers are motivated and capable and that students are 59

72 in good conditions and that their interests are looked after. PTA also serves an important role in sensitizing the community in the value of education. The PTA has ten members of which five members are parents (one president, one treasury, one in charge of school materials & books); two students (one female and one male representative); two teachers and the head master. The PTA takes an active part in the decision making process of the school and for new projects, the PTA must approve. For example, at Nyamata Catholic Primary school, the PTA decides how many books and for what subject the school should use the capitation grant to fill the gap between the number of books provided by MINEDUC/UNICEF and the needs of the students. PTA feedback: Student PTA representatives for Nyamata Catholic primary school reports that the teachers are available for questions and review and that they are overall happy with their school. However, they would like to see that they had access to their own books and computers and that that more time was allocated for each subject. One student representative requested classes to be extended to include Saturdays as well. A PTA representative reported that from a parent perspective, some of the major improvements since capitation were the significant improvement in health, hygiene and environment at the school. Latrines are now always clean and hygienic and gardens help create and promote a clean and organized environment. Also, the addition of electricity is significant as it allows students to use facilities after dark to study. A key future project would be to ensure the school s students have access to computers. Kanzenze Secondary School: Ecole Secondaire Kanzenze in the Nyamata Sector in the District of Bugesera has 262 students, six permanent teachers and one visiting (contractual) teacher. The school has only five classrooms and it is currently renting for free the school buildings from the district. Due to the limited number of classes and resources, the school has a high student/teacher ratio, currently at 60 on average (and in some classes even higher). There are two types of capitation grants received by the school. For students that stay at home, the capitation grant is 11,000 RwFr per student and year and for students that stay in dormitories the amount is 21,000 RwFr per student and year. One third of the capitation grant is used to pay for A2 teachers and the remaining two-thirds are used to pay for books and materials. The school receives little other support besides the capitation grant and would be working under a state of emergency without it. Before the capitation grant, the conditions were extremely bad and the World Food Program had to provide food to its students. Now, the situation is still very difficult as the district only pays 92 RwFr per student/day (boarding school students) and 46 RwFr per student/day (regular students). This is not sufficient to feed the students at desirable levels although it keeps the students from experiencing malnutrition. As such, drop out rates are often due not to hunger but rather to lack of money by students to pay for the dormitory (even with the capitation grant, funding is sometimes not sufficient). Each student however does have mutuelle coverage which is partially paid for by the school and partially paid for by FARG (Victims of Genocide Fund). FARG helps support a number of children with 4,500 RwFr per qualified student per year. The most urgent need for the school at the moment is to find new facilities as the district has requested the school to leave its current facilities (which the district has provided for free). The capitation grant is not sufficient to help support new facilities. 60

73 (d) Interview of beneficiaries Water & Sanitation Project CASE STUDY: HUYE DISTRICT PRSC/G supported Private-Public Partnership (PPP) Rural Water Supply & Sanitation Project (RWSSP) Successful Completion Reaching 20,000 beneficiaries This case study is based on interviews with the Ministry of Natural Resources (James GASARAS, RWSSP; Innocent RWAKOZINA, RWSSP; Odillo MUKIZA, Ministry Engineer), District and Cell officials in the Huye District in the Southern Province (Charles KARANGWA, District Director of Infrastructure; Jean Baptiste Kerry MINANI, Kiruhura Cell Executive Secretary), the RWSSP project coordinator (Goreth BAUHIGA), and interviews with beneficiaries encountered at the project s newly opened water taps and at the Ecole de Commerce et de Sciences de l Education (Jules MUTARAZI, School Discipline Master) on May 27 th Background of RWSSP project : In 2004, a study was undertaken with non-budget support funding to assess the feasibility of a major rural water supply and sanitation project (RWSSP) in what is today the district of Huye. The district of Huye was chosen as a location for the envisioned project for both its technical feasibility in combination with the large number of people in the area that have very limited access to water. The following year, a comprehensive report was completed with non-budget support funding and a plan for a 42 km long water system from source to water point with 34 water taps to provide clean water to 20,000 beneficiaries (with less than 500 meters to water point). Previously, all these beneficiaries collected their water from swamps nearby that were both cumbersome to access and did not provide clean water. The water source chosen for the RWSSP project originates from rivers at high altitudes in the Huye mountain near the city of Butare and thanks to the high altitude of the water source and careful planning and selection of water points, the system planned for and ultimately completed in 2008 uses only gravity and no electricity to provide water from the source, through a treatment plant down to 34 water taps/kiosks. Sites for the water taps and kiosks were chosen based on technical feasibility and population density. A few water points have a kiosk rather than just a mere water tap where it is envisioned that the assigned manager of the water tap can also sell additional products such as soap and detergent. However, only about four of the 34 water taps have a small kiosk. Supervision of the project has been supported through budget support funding and after 2006 when the project was put on hold due to lack of funding, funding through the PRSC/G series allowed the district to start construction of the site in May A local, private entrepreneur was contracted for a seven month period, but due to the solid collaboration with the World Bank, local government and the Ministry of Natural Resources, the local government officials were proud to report that the construction finished in only three months allowing about four months for the district to consider other demands from the population and address improvements to the project during the construction period. Since early 2008, the water taps are now opened up to the public with great success as the water taps have been well received. Cellule officials even report that changes in hygiene and sanitation can already be seen as people have more water to consume for washing. The project is now managed under the National Water Authority and starting in June 2008, the district of Huye will invite contractors to bid for the water supply system. It is 61

74 envisioned that the district will charge a contractor a fee for the use of the infrastructure put in place and that a small fee for managing and maintaining the water supply system will be charged for the usage of water, hence allowing the chosen contractor to operate the system profitable. As part of the terms of reference with the contractor, the district will require that the fee are such that they are affordable to all and that the hiring of managers for the water taps will be from vulnerable groups. It is estimated that the system will allow the contractor to employ about 42 community members, including one person for each of the 34 water taps, plus about five staff and two to three technicians. Feedback from officials regarding the collaboration with World Bank budget support Planning for water supply is and continues to be done at local levels following decentralization in 2006 and this is where government officials would like to see further budget support in the future alongside further technical assistance on district levels. The project team in charge of the RWSSP project on ministry level prior to the budget support remained the same throughout the entire project and, according to local government officials, remained a key factor in keeping continuity of the project, strong collaboration and team spirit, ensure that processes and procurement were smooth, and that communication with all stakeholders with guidance from the World Bank remained strong. The positive response to the budget support of the RWSSP was consistent across all beneficiaries interviewed for the purpose of this case study. Cellule and district government officials, as well as the team from the ministry itself and the RWSSP coordinators, all agreed that budget support in combination with great guidance, dialogue, and support from the World Bank team had led to a very smooth completion of the project ahead of schedule. Funding was always received in a timely fashion allowing for timely payments to all contractors (hence, minimizing any potential delays or conflicts between government and contractors); the procurement process was very smooth (more so than other investment-supported projects, including other World Bank investment projects); the local team on the ground received sufficient support from the district, the ministry, and the World Bank, but was given enough authority to make decision on the ground as needed, hence ensuring that the project remained on track. All stakeholders independently stated that they were extremely pleased with the team spirit in which this project had been undertaken and implemented, creating a great sense of ownership in the project and a strong sense of accountability. All beneficiaries highlighted the fact that no issues remained unresolved in terms of payments to contractors or other issues relating to the completion of the contract as has often be the experience with other projects in the district. On the repeated question if there were any issues that had occurred during the budget support phase of the project that would help advise the bank on how to improve its operations for similar projects in the future, no issues were identified. Instead, all beneficiaries reemphasized all aspects that made the project successful and said that they were currently recommending budget supported projects under the same structure and processes as the RWSSP. They were also quick to highlight the strong need for much further assistance for water and sanitation projects in the district, including an area northeast of the province (in and around the sectors of Kinazi and Rusaira) where about 40,000 people live with no spring source of water, hence providing a particular challenge to the districts. To address 62

75 the need of this area, a project twice the size of RWSSP would be required and the district currently has no funding for such project. Feedback from beneficiaries at site regarding the benefits received from RWSSP water taps During the visits of four of the 34 water points, including the first one at the site of the treatment plant up in the mountain of Huye, questions and answers were exchanged between community members and interviewer. The occasion also allowed the government officials to address its community members and take questions and clarifying the next phase of the project (the privatepublic partnership phase for which the district will open up to bidders by June 2008). The overall feedback from community members was rather consistent. To the question of improved access all respondents said the distance had decreased from minutes one way to less than five minutes and that therefore, they have increased the number of trips, sometimes by three times, to fetch water per day, from maybe one to three times per day to up to six to eight times. Easy access and clean water were key an all respondents said that they would continue to use, most likely to the same extent as now, the new water source even when the management is transferred to a private entity and a fee is charged. No one seemed concerned over the fact that the water was only temporarily being made available for free, due both to information by the local government about the upcoming transfer of management and to the fact that the clean water and easy access was essential and therefore worth paying for. To the question of any behavioral changes since the access to clean water had increased, all respondents said that they no longer have to ration water to the same extent, hence, they could clean themselves, their children, their clothes, kitchen utensils, and living areas more frequently. One community member also stepped forward to share the impact on her small sewing business after the easy access to one of the water kiosks. Before the opening of the water kiosk nearby her tailor shop she had to pay RwF 50 each way to get on a motorcycle taxi to go fetch water for her business, both a costly and time-consuming exercise. Now she can fetch water free (or for less) and have more time over to focus on actual production of clothing. In addition to the individual households, about 20,000 of the 100,000 approximately in the entire area now with less than 500 meter to a water tap and with clean water, several of the district s schools (about five) and health centers (about six) have improved access to a clean water source from the RWSSP project. 63

76 (e) Interview of beneficiaries Results from the Citizens Report Cards (CRC) & Community Score Cards (CSC): ABSTRACT: Rwanda Citizens Report & Community Score Cards report, December 2005 The CRC and CSC study was commissioned by the Ministry of Local Government (MINALOC) in For the CRC, the aim was to gather data and information on a pilot scale of how citizens rate the quantity and quality of services delivered in the health and education sectors. For Kigali City an additional questionnaire elicited responses on how citizen s view distributions services. For the CSC, the aim was to assemble community perceptions on accountability and efficiency of service delivery. The data collected and results reflected in the resulting report were gathered from 4 provinces of Rwanda (Cyangugu, Gisenyi, Kibungo and Kigali City). In each of the province secteurs from both remote and urban districts were visited. Considerable overlaps and slight divergences between findings from CRC and CSC were found. The following is an abstract from the findings of this December 2005 Rwanda Citizen Report & Community Score Card report (by Organization for Social Science Research in Eastern & Southern Africa Rwandan Chapter) Citizens Report Cards used a sample of more than 700 people involving data collected from and by the heads of households, individual pupils, teachers and parents and show that citizens rate highly access to government primary education services. Up to 92.7 percent have access to primary schools that are between 0-1 km. Citizens rate well the quality of teachers. More than 66.8 percent think the quality of teachers is good. However pupil performance rating is not in the highest rating. Only 39 percent state that it is only good. Teachers availability is also given a second best rating with sometimes available having a rating of 40 percent. Notable ratings that may be interesting to policy making are various. Schools having no lunch collected a rating of 92.9 percent. Fees and contribution seem to be demanded and up to 47.3 percent, majority rating, are related expenses for constructions and renovations. Participation of parents is high with the rating for availability of Parent Teacher Associations (PTAs) as high as 91.6 percent. In one term the interaction between teachers and parents was between 1 and 3 times. However the participation through open and sports days is still minimal. More than 54.1 percent indicated that they have no such days. About 66.1 percent are satisfied with how problems related to schooling of their children are solved. Providers of education services offer ratings that are informative on some problems in the sector. Girls abandon schools because of being orphaned as the highest frequent reason or equally for seeking jobs (17.8 percent rating each). Boys abandon school looking for mainly jobs (a rating of 44.4 percent). A majority of schools show lack of laboratories, workshops. Latrines are available in many schools, but are said not to be in adequate numbers and many schools do not have separate facilities for boys and girls (75.6 percent of all responses). 64

77 School teachers get materials like chalk and books (rating 65.9 percent), but many indicate no programs for ICT and technical skills. Most of monetary funds disbursed are from government (90.7 percent) but parents have still to pay for uniforms, most frequent rating being RwF 5000 and for school lunches, most frequent rating being RwF 500. Providers seem to be dissatisfied with accommodation of teachers (78.4 percent dissatisfaction) and partly satisfied with pupils behavior. Pupils seem to think distance is not a problem. About 51.5 percent believe the school is close to home. However they think the provision of desks is poor (70.5 percent), and there is a lack of libraries (89.5 percent) and lack of computers (69.5 percent).the rate of provision of piped water is about 39.3 percent among the respondents and a common problem leading to absenteeism is poor health (42.1 percent). The health sector involved the same number of respondents but involving men and women users as well as providers. Government health services are moderately available with a rating of 53.3 percent compared to availability of private services which are rated at 45.9 percent. The most frequent distance to the nearest government health service is 30 minutes (28.1 percent). A rating of 70.1 percent think the distance to the service is convenient. But a substantial number of households visit other services other than government facility (57 percent). Major reasons are high costs that they cannot afford (10.1 percent), distance (9.4 percent) and to get special treatment (3.7 percent). A large number of women do not deliver at government facility. The rating is 40.6 percent and the rating for delivering at home is 37 percent. A most frequent answer is because of cost (28.4 percent). More than 82.5 percent believe access to medical services in government hospitals is equitable and percent believe the medical personnel are available. There is a fair availability of equipment (70 percent) except for dental services (negative response is 51.8 percent). There are a good number of households that are partly satisfied with government health services generally (22.5 percent) and responses on insufficiency of funds for running the health facility are up to 75.8 percent. About 75.7 percent of the responses are partly satisfied with the attitudes to patients by the health facility workers. Responses show that uniforms are worn (97.4 percent) and facilities are relatively clean (93.7 percent). However a lot of payment for services still come from own pocket (42.3 percent) and about 11.0 percent agree of some unofficial payments especially for laboratory tests (95.1 percent) and for delivery (73.1 percent). The respondents are completely satisfied with health services by 72.5 percent but 25.1 percent indicate partial satisfaction. Members of staff are helpful completely to 65.8 percent but to 26.2 percent their helpfulness is only partial. Up to 96.4 percent indicate that toilets are available but 34 percent say no to availability of separate toilets for women and for men. There are apparently active health committees in many places (91.2 percent) and 53.5 percent show that there are at least monthly meetings. Health facilities are generally rated well except facilities for delivery (mother care) rated negatively by 56.4 percent. X-ray rated negatively by 84.6 percent and negative for family planning is 73.7 percent. Other significantly negative ratings are separate toilet facilities for both sexes (71.8 percent), availability of staff accommodation

78 percent, dental services 83.8 percent, school health services 75 percent, availability a fully qualified medical doctor 91.7 percent and availability of qualified midwives 69 percent. The study included a short questionnaire for plot distribution services in Kigali Ville. It involved a total of 179 heads of households in Nyarugenge and Butamwa districts. Among these 71.9 percent were male ad 28.1 percent were female. Most of the respondents had settled in Kigali before 1994 or 65.3 percent. Only 21 percent responded that they had received services related to plots from the government. Major services offered by government include surveying 46.9 percent, registration 18.4 percent and arbitration 14.1 percent. Most other services are offered by MVK 77.4 percent. About 58.9 percent own plots and 52.3 percent would wish to get low density ones. The factors to access to plots were identified as being wealthy 37.6 percent, having authority 9.9 percent and corruption 6.4 percent. Combining wealth and corruption the rating became 6.4 percent while wealth and authority rated 3.5 percent while wealth plus authority and corruption rated 12.1 percent. Some respondents (47.2 percent) indicated that they paid some money to get land services and the average was about RWF 40,000 which they considered to be on the high side (39.7 percent). On whether payments are accompanied by receipts some 47.8 percent responded affirmatively while 31.5 percent responded in the negative. In relation to whether it takes years or months to get a plot in Kigali City, 32.6 percent responded that it is in terms of years while 31.5 percent responded that it was in months (less than a year). About 52.4 percent thought it took long. Cases of problems related to plot distribution services in Kigali were regarded as many by 36 percent average 28.1 percent and few 36 percent. Asked on whether they see any change in land/plot distribution services in Kigali within the last 5 years 53.9 percent felt that there has been none and 30.4 percent believe the services had deteriorated. More that 55.1 percent are aware of multiple plot owners. About 7.1 percent of these cases may be through know who while know who plus kin relation and corruption may account for 25.9 per cent of the multiple plot access. Community Score Cards are presented as templates with scores and comments for each category of participation. They constitute the second part of the findings. They include four health CSCs at Nyange in Mirenge in Kibungo, Muhima in Kigali City, Ntagazwa in Nyagisagara District, Gisenyi and Rusizi I in Cyangugu Town. Four CSCs for education are Cyato Primary School in Gatare Cyangugu, Umubani I in Gisenyi Ville, Butamwa in Kigali per urban areas and Rubona in Kibungo Ville. Before each CSC there is an overview of the process as it was summarized by the researchers. Each CSC consisted of an Input Tracking Matrix, Community Score Cards prepared by different focus groups and a Joint Action Plan prepared by all of members of each community. Many schools reflect similar problems lack of ICT, laboratories, dilapidated or lack of buildings, and low salaries. There is no lunch for children, school accounts run by parents and schools are working but transfers take a long time. In Cyato Primary School pupils score positively teaching quality at 75 percent and most of the rest between 0 and 35 percent particularly building 66

79 equipment, materials and teachers welfare. In Umubano I primary school a new issue that arises is lack of play grounds where they have to borrow space from other institutions as well problems of English teaching. At Rusizi Health Centre ambulatory service are given a score of 0. Space for consultation is given a score of 30 percent. But at the same time it is noted that it has high quality services that attract patients from neighboring DRC. The contractual approach to health service delivery at the centre is noted as an important innovation. However problems still persist in relation to cost of services to poor people and the restricted application of health insurance. Some participants in Butamwa Primary School scores utilities 0 per cent. This is in relation to non availability of water and electricity. However there is also lack of school materials generally. But one group scores 95 percent the availability of qualified teachers. The only problem is that when they fall ill or go for maternity leave a problem of replacement is recurrent because majority are women. Nyange Health Centre has a unique problem of lacking a maternity ward (scored 12 percent). It is recommended that the centre be upgraded to a hospital. There are no HIV testing facilities (scored 0 percent) and essential drugs for pregnant women are not available (e.g. drugs for inducing labour). Health insurance mutuelle has not been widely adopted by most of the people (score 15 percent). Muhima health Centre has very good scores above 50 percent. The lowest score is 30 percent for equipment availability. Response/subscription to mutuelle is given a score of 40 percent and availability of drugs given 40 percent. It is possible to believe that common problems encountered in rural health centres are not necessarily common to a center in an urban area particularly Kigali City. For more detail, please refer to the full report. 67

80 Annex 3. Stakeholder Workshop Report and Results On June 12 th 2008 government officials and general budget support donors were invited to attend a workshop at the World Bank office in Kigali to review the draft ICR report of the PRSC/G series to go to final review on June 24 th The participants had already been asked to provide feedback on the PRSC/G I/II/III operation as early as April 2007 during the first official ICR Review mission. Following that mission and the subsequent results reported by GoR on sectorspecific and macro economic performance during the Joint Budget Support Review in April 2008, the ICR draft report prepared to reflect stakeholders views in the context of the progress reported as of This workshop allowed key stakeholders to provide final output for the ICR review of the operations. The following stakeholders were invited: Mr. Rwangombwa John, Secretary General; Mr. Gatwabuyege Vincent, Secretary General MININFRA; Mr. Nsanzumuganwa Emmanuel, Secretary General MINITERE; Mr. Ruzindaza Ernest, Acting Secretary General MINAGRI; Mrs. Kayonga Caroline, Permanent Secretary MINISANTE; Mr. Nsengiyumva Justin, Secretary General MINEDUC; Mr. Musafiri Prosper, Director General Economic Development MINECOFIN; Ms. Sayinzoga Kampeta, Director of Macro Unit MINECOFIN; Mr. Nkulikiyinfura Francois, Head of Treasury MINECOFIN; Dr. Sekabaraga Claude, Director of Planning MINISANTE; Mr. Yissa Claver, Director of Planning MINEDUC; Mr. Duncan Overfield, Economic Advisor; Mr. Arne Strom, Counselor SIDA; Mr. David MacRae, Head of European Commission; Mr. Diko Muketa, Resident Representative; Mr. Stephan Klingebiel, Head of KFW; Mr. Anthony Ohemeng-Boamah, Country Director UNDP For stakeholders not able to attend the workshop, electronic feedback was encouraged. 68

81 Annex 4. Borrower s ICR 1.0 Introduction The report is the Government of Rwanda s (GoR) contribution to the Implementation Completion Report (ICR) prepared by the World Bank. The ICR assesses the implementation of the PRSC/G I, PRSG II, and PRSG III (PRSC/G series) which, following the first approval of PRSC/G I in the fall of 2004, went to support the fiscal budget years of The first section looks at (i) the background to the assignment (objectives; scope of work; methodology), (ii) the performance outcome of the program (development objectives and achievements, risks, success factors, effectiveness and quality of implementation, compliance, effectiveness of key strategies), and (iii) the appropriateness of the World Bank assistance (importance and fiduciary responsibility). The second section looks at the challenges and is summarized with concluding remarks. 1.1 Background As part of the PRSC/G series, which ended with the fiscal budget year in December 2007, the World Bank and the Government of Rwanda are required to jointly evaluate the PRSC/G series, as is the case for all completed lending operations. The first series of PRSC/Gs designed to help the Government of Rwanda implement key policy actions outlined in its July 2002 Poverty Reduction Strategy Paper (PRSP), outlined the following main objectives: creating a favorable private sector investment climate that would promote macroeconomic stability and sustained economic growth; improving quality, coverage, and equity of basic service delivery through improved expenditure efficiency; supporting overall improvement of public expenditure management and governance, with an emphasis on transparency and accountability to citizens voice and participation Objectives The main objective of this evaluation assignment will be to assess performance in the implementation of the PRSC/G series, which closed in December In specific terms, this assignment seeks to evaluate the following: 1) The extent to which the major objectives of the PRSG series were achieved, along with other significant outcomes of the PRSG series and prospects for sustainability 2) Government of Rwanda (Borrower) performance; and 3) Bank performance and that of other co-financiers of the program. 69

82 This evaluation report will also attempt to provide data in form of progress of key indicators as outlined in the PRSG series documents and analysis of sector specific performance to substantiate assessments made, including the views of Government of Rwanda of the PRSG series on implementation and results, highlighting lessons learnt Scope of work Areas included in the evaluation of the PRSG series include: 1. The development impact of the PRSG series. Specific questions to be addressed in this evaluation report are; To what extent were major objectives achieved (or expected to be achieved), are they still relevant, and were they achieved efficiently? (Section 1.2.2) What are the risks that the development objectives will not be achieved in future or maintained, and what is the potential impact if these risks materialize? (Section 1.2.3) What are the important success factors that played a role in the achievement of the development objectives? (Section 1.2.4) 2. The effectiveness of Government of Rwanda and the World Bank in preparing, implementing, monitoring and evaluating the PRSG series. The specific questions to answer in this regards are (Section 1.2.5); What is the extent to which Government of Rwanda and World Bank ensured quality of preparation, implementation, monitoring and evaluation of the PRSG series? (Section 1.2.6) How well did Government of Rwanda succeed in meeting all prior action triggers toward the achievement of development outcomes? (Section 1.2.7) How effective were the key strategies developed and implemented during the PRSG series? Were the organization and management arrangements effective? Could the constraints have been recognized and solved earlier? (Section 1.2.8) 3. The appropriateness of Bank assistance (Section 1.3) To what extent did services provided by the World Bank ensure quality at entry and support effective implementation through appropriate supervision toward achievement of development outcomes? (Section 1.3.1) To what extend did the World Bank pay sufficient attention to fiduciary responsibilities and safeguards, including procurement reviews, disbursements, review of budget and expenditure information and audits, environmental impact assessments, monitoring of progress of key indicators and attention to results? (Section 1.3.2) 70

83 1.1.3 Methodology To achieve the objectives of the assignment a literature survey methodology in addition to the collection of views from relevant ministries, in particular ministry of finance, ministry of infrastructure, ministry of water and sanitation, ministry of education, and ministry of health. Concerning the literature survey, several documents specific to the assignment were reviewed (see Annex 6). This was done to find background information as well as the relevant information to measure performance. In terms of the collection of views from relevant ministries, this was done through internal processes led by the ministry of finance and with a formal meeting with all stakeholders held during the first week of June Program Outcome This section of the report looks at the implementation outcome of the PRSC/G series. Specifically, the issues evaluated are (i) the development objectives of PRSC/G series, (ii) the extent of achievement of the development objectives, (iii) program risks, (iv) program success factors, (v) the effectiveness and quality of Government of Rwanda in implementing the PRSC/G series and measures of monitoring and evaluation, and (v) compliance with agreements, (vii) the effectiveness of key strategies, and (viii) the appropriateness of the Bank s assistance Development Objectives of PRSC/G Series The overall development objective of the PRSC/G series was designed to help the Government of Rwanda implement key policy actions outlined in its July 2002 Poverty reduction strategy paper (PRSP), which focused on (a) creating a favorable private sector investment climate that would promote macroeconomic stability and sustained economic growth; (b) improving quality, coverage, and equity of basic service delivery through improved expenditure efficiency; and (c) supporting overall improvement of public expenditure management and governance, with an emphasis on transparency and accountability to citizens voice and participation. In line with this agenda, the objectives of each operation in the first PRSC/G series are indicated below. PRSC/G I: PRSC/G I s objectives were to support the Government of Rwanda s efforts to: (a) stabilize the macroeconomic framework and advance the privatization program; (b) develop a result-oriented MTEF approach to budgeting, including the development of sectoral MTEFs, particularly in education, health, water, and energy, and pilot performancebased contracting agreements for provision of services in these sectors; (c) strengthen governance and transparency, particularly through an improved fiduciary framework and establishment of the Office of the Ombudsman, along with associated election of local mediators. PRSG II: Building on the objectives of PRSC/GI, PRSG II s objectives included helping the Government of Rwanda in: 71

84 (a) maintaining a stable macroeconomic framework, creating a strong basis for private sectorled economic growth, driven by agricultural transformation, promotion of exports, and deepening of the financial sector; (b) strengthening the results orientation of its MTEF and associated sectoral MTEFs, particularly in education, health, water, and energy, strengthening the linkages between MTEF priorities and the budget, and expanding performance-based contracting of services; (c) continued strengthening of governance and transparency, particularly through further improvements to the fiduciary framework and empowerment of local communities. At the Government of Rwanda s request, given important linkages to the growth agenda, including agricultural transformation and export promotion, policy dialogue in the transport sector was added. PRSG III: Building on achievements under PRSC/G I and PRSG II, PRSG III continued support to the Government of Rwanda as it implemented its reform program which, with the effectiveness of a territorial reform law in January 2006, was being undertaken in the environment of enhanced decentralization. Within this context, PRSG III s objectives included to help the Government of Rwanda: (a) build on the successes with decentralized service delivery, particularly in education, health, water, and energy; (b) maintain a stable macroeconomic framework, creating the basis for private sector-led economic growth, driven by agricultural transformation, export promotion, financial sector deepening, and information communications technology (ICT), which was expected to be a main focus of the Government of Rwanda s second PRSP; (c) strengthen further the linkages between strategic planning, its MTEF, and budgeting, with a particular focus on the service delivery sectors; and (d) continue to improve governance and transparency through further reforms to the fiduciary framework and empowerment of local communities. Policy dialogue in the transport sector was to continue while, at the Government of Rwanda s request, dialogue on social protection was added. Various strategies were pursued in the course of implementation to achieve program targets of the development objectives of the PRSC/G series. The issues discussed in this section focuses on the extent of achievement of the development objectives of the PRSC/G series, risk that could otherwise have imposed some limitations on the achievement of the development objectives as well as the factors that engineered the current level of success. The three main policy areas supported by the first PRSC/G series included; Policy Area 1: Improving Service Delivery for the Poor Education, Health, Water, and Energy; Transport, and Social Protection 72

85 Policy Area 2: Private Sector-led Growth and Agriculture Transformation for Poverty Reduction Policy Area 3: Public Sector Underpinnings for Improved Service Delivery Public Expenditure Management, Transparency and Accountability, and Monitoring and Evaluation Extent of Achievement of development objectives To what extent were major objectives achieved (or expected to be achieved), are they still relevant, and were they achieved efficiently? (Section 1.2.2) Though Program Development Objective (PDO) indicators, an assessment of the extent of the achievement of the development objectives have been assessed. Data used for the analysis of the development impact of PRSC/G series is contained in PDO table in the main World Bank ICR report (pages iii-v). The table analyses performance by looking at the level of change and the extent of achievement of the target set for the broader objectives of the PRSC/G series (as listed in section above). Indicators to evaluate Key Policy Area 1: Improving Service Delivery for the Poor Education, Health, Water, and Energy; Transport, and Social Protection Original Target Values (at end of PRSC/G Base Line Value Series) % of Children having completed Primary School Formally Revised Target Values Acutal Values at Time of Completion PDO Indicator 1: Value (quantitative or qualitative) 33% 67% not applicable 52% Date Achieved PDO Indicator 2: Immunization Coverage Value (quantitative or qualitative) 83% 95% not applicable 98% Date Achieved PDO Indicator 4: Access to clean water & Sanitation Facilities Value (quantitative Clean Water: 71%; or qualitative) 48% 50% not applicable Sanitation: 42% Date Achieved Base Line Value Intermediate Outcome Indicator Formally Revised Target Values Acutal Values at Time of Completion PDO Indicator 5: Under Five Mortality (per 1,000 births) Value (quantitative or qualitative) not applicable 152 Date Achieved * 73

86 PDO Indicator 6: Use of Bed Nets Value (quantitative or qualitative) 4% 30% not applicable 65% Date Achieved Indicator to Evaluate Key Policy Area 2: Private Sector-led Growth and Agriculture Transformation for Poverty Reduction Original Target Values (at end of PRSC/G Formally Revised Target Values Acutal Values at Time of Completion Base Line Value Series) PDO Indicator 3: Number of Days to Open Business Value (quantitative or qualitative) 40 less than 20 not applicable 16 Date Achieved Base Line Value Intermediate Outcome Indicator Formally Revised Target Values Acutal Values at Time of Completion PDO Indicator 8: Export of Goods & Services to GDP Ratio Value (quantitative or qualitative) 8.3% 10.3% not applicable 10.1% Date Achieved Indicator to Evaluate Key Policy Area 3: Public Sector Underpinnings for Improved Service Delivery Public Expenditure Management, Transparency and Accountability, and Monitoring and Evaluation PDO Indicator 9: Value (quantitative or qualitative) Base Line Value Intermediate Outcome Indicator Formally Revised Target Values Acutal Values at Time of Completion MTEFs for Key Ministries (education, health, water & energy) prepared annually with budget allaocation reflecting MTEFs MTEF introduced in 2000 but linkages to priorities & budget weak or non-existing Progress in preparation of MTEFs for key sectors not applicable National level MTEF and Sector MTEFs achieved in Health, Education & Water (with room for further improvements); Education MTEF & budget linkage most advanced; Energy MTEF developments remain weak. Date Achieved

87 PDO Indicator 10: Public Procurement Law Complying with Best Practices Published in Official Gazette Value (quantitative or qualitative) Outdated Procurement code Public Procurement Law complying with international best practices published in Official Gazette Revised draft of Public Procurement Law consistent with international best practices submitted to Parliament Modern Procuremen Law, in line with best international practice published in Official Gazette Date Achieved Apr-07 PDO Indicator 11: Value (quantitative or qualitative) Citizen Report Cards Results disseminated to the Public and used in Poverty Reduction Stategy to assess User Satisfaction with Services Use of CRC & questionnaires not yet adopted or designed CRC and CSC piloted for education and health not applicable Community Report Cards & Score Cards piloted for education, health in 2004/2005; adopted by GoR in 2006 as instrument to monitor poverty reduction programs Date Achieved Furthermore, looking at the key priority areas, the following progress has been found as part of the evaluation that was undertaken as part of the next PRSG series: Key Policy Area 1: Improving Service Delivery for the Poor Education, Health, Water, and Energy; Transport, and Social Protection Improving Service Delivery for the Poor in Education: Education Reforms: Under PRSC/G series, Rwanda made substantial achievements in the education sector. The move toward a results-oriented budget and MTEF has been accompanied by reforms in the education sector. A number of significant actions were taken included the development of an Education Sector Strategic Plan (ESSP) aligned to the results-oriented sector MTEF, the initiation of capitation grants for primary schools, and District Education Funds were adopted to support particularly needy students. An Organic Education Law as passed and the Higher Education Law was adopted and its provisions were aligned with the sector financing strategy and MTEF. The sector financing strategy was also updated to give it a ten-year perspective and put more emphasis on quality issues, including the reduction of pupil-teacher ratios. On the strength of a Long Term Strategy and Financing Framework (LTSFF), developed with technical assistance, Rwanda applied for funds to the Education for All Fast Track Initiative, resulting in an award o f US$70 million for to help fill the sector financing gap. Theme/Sector Reform Measures Undertaken Year Improved Access & Quality of Human Development & Infrastructure Services 75

88 Education National Council of Higher Education established 2006 Independent Student Financing Agency of Rwanda established 2006 Long-Term Strategy and Financing Framework for education developed 2006 Higher Education Law passed 2005 Organic Education Law passed 2004 Education Sector Strategic Plan (ESSP) and sector MTEF developed 2004 Capitation grants established 2004 District Education Funds adopted to support particularly needy students 2004 Education Results: Recent statistics show improvements in education sector performance, with the system close to universal primary education, with net enrollment estimated at 93.5% in 2005 compared to 73% in The net enrollment of females of 94.7% is higher than that of 92.2% for males. The high gross intake to the primary level of 140% over reflects those children who were forced to interrupt their education because of the genocide and its aftermath. Completion rates rose from 30% in , to 42% in , and to 52% in However, the quality of primary education remains low. The repetition and drop-out rates remain high at 18.8 and 14 %, respectively. The primary school student-teacher ratio, estimated to be 71:l in 2006, has continued to rise. In order to accommodate the increasing demand and improve quality, increasing the supply of well trained teachers at the primary level will be critical. In secondary education, enrollment rates were around 10%, at 10.6% for males and 9.5% for females. The recent introduction of fee-free tronc commun in schools in the public sector should help to increase enrollment in secondary education and address the disparities in enrollment between the poor and the rich households. Finally, the gross enrollment rate at tertiary level (approximately 3%) is comparable to the regional average. Decentralization is also taking roots in the education sector, with increased involvement of communities in the management of schools and the introduction of resource transfers per student (capitation grants) from the center to school districts. Improving Service Delivery for the Poor in Health: Health Reforms: Several reforms under the PRSC/G series were adopted in health and the Government of Rwanda focused its efforts on systemic issues that have undermined the effective use of resources and increased access to health services and prevention for the poor. The measures taken included a results-oriented MTEF for the sector; performance-based and conditional transfers to service providers; performance-based contracting for community health centers; broadened access for vulnerable groups through community-based risk-pooling schemes (mutuelles); improved control of communicable diseases through incentives for rural health care professionals; and coherent policies for addressing HIV/AIDS, malaria and other communicable illnesses. In the health sector, pilots of performance-based contracting mechanisms have provided incentives for effective private sector delivery of health and related services. Theme/Sector Reform Measures Undertaken Year Improved Access & Quality of Human Development & Infrastructure Services 76

89 Health Performance-based scheme expanded to all 12 regions 2006 Health sector strategy and MTEF developed 2004 Performance-based contracting approach for high-impact health services introduced 2004 Mutuelles (local insurance scheme) scaled-up 2004 List of essential drugs prices supplied by drug purchasing agency published 2004 Policy and prices for anti-retroviral therapy elaborated 2004 Health Results: The Demographic Health Survey (DHS) shows a 25% decrease in under-five mortality between 2000 and 2005 followed by a 35% decrease between 2005 and 2008, and continued improvement in vaccination rates. Routine reporting statistics indicate an increasing trend in vaccinations, with an increase in DPT3 from 89% in 2004 to 95% in Health insurance coverage by mutuelles increased from 27% in 2004 to 51% in 2006 and is now estimated to be 75%. Improvements in infrastructure and equipment at health centers and hospitals and the addition of more doctors and nurses resulted in an increase in the utilization rates of health centers from 0.4 to 0.7 per capita per year. Utilization of insecticide treated bed nets increased from 4% in 2004 to 40% by 2006 and utilization of assisted deliveries increased to 39% of the population, from 29% in The HIV/AIDS prevalence rate is 3% of the adult population, with infection rates of 3.6% among females and 2.3% among males, and 7.6% and 2.2% for urban and rural residents respectively. Testing, through a nationwide network of 256 voluntary counseling and testing centers, has increased. The cumulative number of pregnant women tested represents roughly 90% of women attending antenatal care, which facilitates the targeting of care and prevention messages. The percentage of youths (15-24) with comprehensive knowledge rose from 22 to 53% between 2002 and The number of people living with HIV treated by Highly Active Antiretroviral Therapy (HAART) has also increased. To maintain the gains made in health, there will need to be continued attention to increasing access to services, particularly in the area of increasing assisted deliveries and reducing the incidence of childhood diseases as a means of reducing infant and maternal mortality In contrast to the improvements in health, nutrition in Rwanda has deteriorated in the last five years, as seen from the DHS 2005 survey. Rwanda s chronic malnutrition rate is among the highest in Africa. It is estimated that the economic impact of poor nutrition on Rwanda is equivalent to 1.1% of the GDP resulting from direct losses in productivity from poor physical status, losses due to increased health care cost, and losses from poor cognitive function and deficits in schooling and learning ability. The average calorie intake in Rwanda of 2,070 kcals/person/day (FAO 2003) is below the recommended levels, with about 3 million of the population of 9 million consuming below recommended allowances. Child caring and feeding practices are exacerbating the problem. Recent data from the DHS 2005 survey indicate that Rwandan mothers do not follow the proper infant feeding recommendations. Overall, around 3.2 million men, women and children out of 9 million in the population are anemic, thereby impairing their labor productivity. Depending on the nature of tasks, eliminating anemia in the population has been found (in evaluation studies worldwide) to raise labor productivity by 5-17%. Chronic malnutrition measured by stunting (low height for age) was estimated at 45.2% in 2005 (DHS 2005), compared to 42.6% in 2000 (DHS 2000). Improving Service Delivery for the Poor in Social Protection: As mentioned above, the main policy area relating to social protection under the first PRSC/G series included improving service delivery for the poor, with a focus on education, health, water, 77

90 and energy with policy dialogue on transport and social protection added under PRSG II and III, respectively. The following is a summary of social protection initiatives and findings during the PRSC/G series: Social Protection Status & Results: A public expenditure review of social protection (SP) in 2006 showed that broadly defined social protection spending makes the social protection sector one of the largest sector when measured as a percentage of GDP. But, these programs are not well coordinated, and the Government of Rwanda has initiated the following actions to improve coordination: (i) establishment of a SP Sector Working Group, with emphasis on the needs of vulnerable groups, the poor and disadvantaged; (ii) priority setting, coordination, and rationalization of existing SP policies and ongoing programs of governments, development partners, and NGOs to enhance their impact; (iii) a trend from project-style assistance towards budget support and/or sector-wide approaches with development partners; (iv) ensuring that any new initiatives are both financially sustainable and technically well-structured; and (v) adopting programs to support national and local government capacity building, including training people in relevant skills, and staffing commensurate with the sector s strategic agenda. The sector s Vision 2020 Umurenge (VUP) program is considered a flagship program under the Government of Rwanda s EDPRS with focus on public works, assistance to farmers, and direct technical assistance to vulnerable groups. However, the sector still needs a comprehensive strategic plan to complement the segments of vulnerable groups currently not addressed under the VUP program, and although such complementary strategy is underway, the sector still struggles from a lack of coordination amongst stakeholders. The SP sector has under the PRSC/G series nonetheless involved into a sector with a stronger focus and strategic plan with a specific place under the Government of Rwanda s EDPRS and the World Bank has in the last few years provided support to this sector. Improving Service Delivery for the Poor in Water: Under the first PRSC/G series, improvements in access to clean water can be noted. In 2007, access to safe water increased in Rwanda by 6.8%, bringing to 71% the total population with access to safe drinking water. The PRSG IV indicator of 70% of the population having access to an improved water source is already achieved. The additional 636,766 people have access to safe water through the construction of more than 1,000 new water points. Rwanda has been able to increase access to rural water to an average of 600,000 people since This is a steady and outstanding performance. Theme/Sector Reform Measures Undertaken Year Improved Access & Quality of Human Development & Infrastructure Services Water Sectoral working group established 2005 Water policy drafted 2005 Water supply activities at district and community level implemented 2004/05 Private-Public Partnerships: The private participation into the operation of piped, rural water supply systems continues to be a success, of which the PRSG supported RWSSP (Rural Water Supply & Sanitation Project) led by the World Bank as a Public-Private Partnership program serves as an example of success. Under the RWSSP an additional 20,000 citizens gained access to 78

91 clean water in the first part of 2008 following the completion of the construction by end 2007 (for further details about the outcomes and feedback from beneficiaries of this project, please refer to Annex 2). The target of 35% of systems to be privately managed by November 2008 is expected to be reached. As of April 2008, 28.9% of systems are already privately managed. Water resource management: The target of at least 40% of the springs protected following national standards is on track. Spring protection is implemented by the districts. Unfortunately, the 2009 target of 80% is overestimated and will need to be lowered. Additionally, the monograph of the Kagera Basin was completed in October This monograph was the first step in achieving a water resources management target of an investment plan for the Kagera (large and small scale) in the Nyabarango and/or Muvumba Basins. Sanitation: In 2006, 85% of the population had traditional household sanitation facilities, of which only 38% were considered by the 2004 UNICEF/WHO JMP report as hygienic onsite sanitation. All district performance contracts signed in 2006 committed to expand their respective household sanitation coverage to 100%. In 2007, 42% of the household sanitation had been achieved against a target of 45% in the EDPRS. On the prior actions of the PRSG IV, the water law has been endorsed by the parliament, and water supply and water resources management have been mainstreamed in the 2008 budget. The water law is expected to be enacted by July The water supply and water resources management capacity will be retained in a unit or water agency. Also, during the AfricaSan Conference held at Durban in February 2008 the ministry presented the Country Sanitation Status Also, a sanitation pilot project (including 10,000 eco-toilets) is under development and the water and sanitation sector will be a key focus area under the next EDPRS. Improving Service Delivery for the Poor in Energy: Energy Results: Developing the energy sector in Rwanda is a major challenge. Only 4% of the population has access to electricity (most burn fuel wood) and those that do are subject to high tariffs. Nevertheless, major advancements were achieved by MININFRA in the first quarter of 2007, including the opening of the largest solar energy plant in Africa and the construction of micro-hydro plants across the country. Rwanda continues to import heavy fuel oil at great cost to maintain a degree of energy security. New projects will make use of new funding from a GTZ biogas program, a GEF grant for renewable energy, a EU grant for solar and hydro power, a BTC grant for the completion of the Rwanda hydro power atlas, and a GTZ grant to build a transmission line to the northern province. The following table highlights key reforms in this sector under the first PRSC/G series: Theme/Sector Reform Measures Undertaken Year Improved Access & Quality of Human Development & Infrastructure Services Energy Passage of electricity and gas legislation 2006 Adoption by Cabinet of revised electricity tariffs 2006 Tariff rate increased from RwFr 42 to RwFr 81 and further to RwFr /05 79

92 The key achievements under the first PRSC/G series include (i) the prioritization of much needed energy projection projects, (ii) the introduction of passing on fuel cost to consumers through the purchase of diesel generators, and (iii) the crucial aspect of World Bank swift action and management of the electricity crisis in In terms of the energy crisis, the World Bank s budget support made it possible to quickly reallocate funds to address new priorities as they emerge during this crisis. Emphasis was put on purchase of rental power, subsidy of fuel, and other key elements to ensure that the crisis by the second half of 2005 had improved. Overall, the Government of Rwanda considers the World Bank s dialogue and sensitivity to changing demands in this sector of importance, as illustrated during the privatization efforts of Electrogaz that after a failed contract with a German contractor had to be reversed. In this context it is also important to recognize that prior to the first PRSC/G series, nothing had been done in the energy sector for the last 20 years and that the energy sector was not even part of the Government of Rwanda s PRSP in Hence, the Government of Rwanda have very much benefited from the expertise under the PRSC/G series to address many of the sector s challenges. Also, much of the dialogue in energy has had an important trickle-down affect on the water sector. Significant progress has also been made on a number of deliverables identified at the last JBSR. First, on the request from donors for consolidated data for the energy sector, a main energy budget line has been transferred from MINECOFIN to MININFRA. A public expenditure review from has been initiated but its final draft is delayed. An energy sub-sector information database is being set up to tore data on supply and demand, and a comprehensive monitoring and evaluation system is being set up. Also, on the recommendation that a biomass strategy be developed, a GTZ-supported (with the Netherlands as a blind partner) National Domestic Biomass Program has been set up. It will include the dispensing of environmentally sound and health conscious cooking stoves as well as grid extensions to districts currently exclusively dependent on biomass. Looking at the Medium Term Economic Framework, the 2009 budget for the energy sector is expected to grow significantly as major project will be wrapping up. The MTEF includes four key EDPRS-related outcomes, each with clear sets of actions. For the first access to electricity deliverables include the increase of Electrogaz subscribers (on and off grid) from 77,00 to 200,000, the reduction of service interruptions, access for key public facilities, increased generation of low costs sources (including Kivu project) and access to modern lighting for unconnected households. For the second reduced cost of services the action plan includes introducing and maintaining cost-reflective tariffs through periodic adjustment, and increasing energy efficiency. For the third - diversification of energy sources/energy security energy sources will be diversified by rehabilitating old storage facilities and building new ones, and promoting access to cleaner, sustainable and affordable cooking stoves. Finally, the outcome of strengthening the governance framework and improving institutional capacity will be achieved by reforming the regulatory and institutional frame, including regulations for renewable energy and energy efficiency, the signing of a performance contract with Electrogaz, improvements to human resources capacity and the reinforcement of the institutional framework through the implementation of the National Energy Policy. The costing of this plan shows a requirement of 257,000 million RwF. 80

93 Improving Service Delivery for the Poor in Transport: As mentioned above, the main policy area under the first PRSC/G series included improving service delivery for the poor, with a focus on education, health, water, and energy with policy dialogue on transport and social protection added under PRSG II and III, respectively. Although the dialogue in transportation remained less significant than in other sectors identified under the PRSC/G series, the initiation of dialogue has laid a foundation for stronger collaboration and support during the next PRSG series. In addition, the reinforcement of the Road Maintenance Fund during the PRSC/G series was a key development in the sector during the PRSC/G series. The fund was previously heavily underfunded but with the current emphasis on growth and with substantial investments going into building out the country s infrastructure, the push by stakeholders to significantly increase funding for road maintenance will serve the Government of Rwanda well going forward. The following is a summary of transport initiatives and findings during the PRSC/G series: Transport Sector 2007 Budget Execution (Development Budget, Recurrent Budget); the 2007 New Development in Transport Program and Projects; the Road Management Fund; the MTEF and Budget 2008 and finally the EDPRS. Regarding the assessment of the feeder roads network condition, an assessment is underway by the district (infrastructure teams led by district engineers), including a comprehensive exercise including road network condition and road projects implementation progress. MININFRA staff starting to offer field visits to support districts. With regards to the 2007 Development Budget Execution, the total amount of budget allocated was 16.9 billion RwFr and the budget execution was around 10 billion RwF equivalent to 59% of the total amount. Regarding the new development in transport, progress on the main road projects is tangible. A contract was signed in May 2007 for the Road rehabilitation of Ruhengeri-Gisenyi Road construction and rehabilitation projects include the Road rehabilitation of Gitarama-Ngorero which the mobilization phase is ongoing with ADB, and the Road construction of Mayange-Nemba. Key Policy Area 2: Private Sector-led Growth and Agriculture Transformation for Poverty Reduction Private Sector-led Growth & Agriculture Transformation Reforms & Results: Broad based market reforms have been undertaken to liberalize trade and the exchange regime, promote exports, privatize state-owned enterprises (SOEs), and reform key government agencies. Liberalization of the monetary and financial sectors led to the adoption of new currency exchange rate regulations, the licensing of private commercial banks, and the privatization of state-owned banks. The following table highlights some of the key reforms supported by the first PRSC/G series in this key policy area: Theme/Sector Reform Measures Undertaken Year 81

94 Private Sector Development & Economic Growth Private Sector Two more tea factories privatized 2007 Development & National microfinance policy adopted 2006 Economic Growth New microfinance law drafted and submitted to Parliament 2006 Rwanda Agriculture Development Authority (RADA) establised 2006 Rwanda Animal Resources Development Authority (RARDA) established 2006 Rwandatel, RwandaEx, and two tea factories privatized 2005 Export promotion strategy developed (incl. Rwanda Investment & Export Promotion Agency) 2005 Land Law published in the Official Gazette 2005 Agriculture sector MTEF aligned with Sector Strategic Plan 2005 Regulartory framework for microfinance adopted 2005 Investment Code revised to align with revised tax code 2004 Commercial Chambers establised 2004 National Agricultural Policy and Sector Strategic Plan (PSTA) developed 2004 Premium pricing of tea leaves for producers introduced 2004 Agriculture Guarantee Fund established 2004 Also, a number of institutional reforms were implemented to promote improved private sector development and export promotion. A multi-sectoral regulatory agency, Rwanda Utilities Regulatory Agency (RURA), was established in 2003 to oversee the regulatory framework for private investment in water, electricity, and telecommunications. The Rwanda Investment and Export Promotion Agency (RIEPA) was made fully operational and the export promotion strategy was adopted. In particular, the first PRSC/G series played an important role in the development of the Export Promotion strategy and which has laid an important foundation for the EDPRS and the next PRSG series to build upon where private sector-led growth and expansion of export are identified as key elements of Rwanda s overall development. The export promotion supported under the first PRSC/G series focused on the following sectors: Coffee: investment in production and quality, support washing stations, provide extension services to farmers and improve promotion Marketing. Tourism: training of private and public sector operators, invest in accommodation and roads and diversify tourism product, product development at the key tourism sites to ensure that tourists stay longer, with continued aggressive marketing and mass training of the staff in the hospitality industry. Tea: add value to Rwanda tea through direct marketing, investing in production and quality and rehabilitation of private tea factories. Mining: continued value addition and increased foreign direct investment in the sector. In 2007, this sector showed strong results, offsetting much of the downturn in the tea and coffee market, showing the importance of a diversified export promotion strategy and highlighting the progress in this sector. Over the period , privatizations were completed in the tea, coffee, and telecommunication sectors. For example, Rwandatel (the state telecommunications company) was successfully privatized in June However, the management of Electrogaz (the main public utility for water, gas, electricity services) remains in public ownership after a failed attempt to transfer ownership a private German-based operator following the energy crisis that occurred in 2004 shortly following the initiation of the contract where the Government of Rwanda assessed 82

95 that the new contractor was not sufficiently able to cope with the crisis. In the financial sector, Government sold its shares in two banks and the overall financial soundness of the commercial banking sector has improved. Banking sector regulation and supervision has been strengthened, a regulatory framework for microfinance created, and a School of Finance and Banking established. The government has also undertaken forceful judicial reform, upgraded the public credit information system, and is undertaking ongoing efforts to modernize the legal and regulatory framework for commercial and financial transactions. Rwanda is a member of the Common Market for Eastern and Southern Africa (COMESA) and recently joined the East African Community (EAC) and throughout this process of private-sector development with Government of Rwanda driven initiatives, the dialogue and support by the Bank has helped ensure its success. Rwanda has also made progress in reducing the cost of doing business, leading the country to earn a Top 10 performer ranking in the World Bank s 2006 Doing Business Report. This is a major achievement, showing Government of Rwanda s commitment to its policy agendas and its ability to introduce significant reforms in a short period of time. However, continued effort will be needed to reduce the costs of doing business, as Rwanda is ranked 150 out of 178 countries due mainly to the bureaucratic and financial costs of doing business related to closing a business, trading across borders, and protecting investors. In this regard, Government has elaborated a Doing Business Action Plan and has prioritized reforms that can be adopted to quickly address problems related to high bureaucratic and administrative costs, all of which will receive continued support under the next PRSG series. Government is also moving to improve coordination among agencies, development partners and stakeholders engaged in trade and the private sector related issues. Agriculture Sector Reforms & Results: Government of Rwanda s first PRSP identified the recovery of agriculture as the primary engine of growth in the medium-term and as such became an important component of the first PRSC/G series. It emphasized intensification and commercialization through increased use of traditional and modem inputs, particularly fertilizer, and the importance of public actions in the area of research and extension and increased public spending to provide services to the sector. In particular, the Government of Rwanda believes the introduction of the crops intensification program, originally not fully supported by other stakeholders, has proven to be a key program in the last few years for the agricultural sector. The agricultural sector has struggled with lack of clear policy and strategy and here the PRSC/G provided invaluable support in pushing the sector to make progress. It is under the PRSC/G series that the National Agricultural Policy and Agricultural Strategy (PSTA), which was to be the framework for policies and actions, was developed and approved. However, the PSTA was not finalized until 2005 and any significant results are not yet evident as the sector continues to struggle compared to other key sectors. An independent evaluation of the PRSC/G noted that the predominance of very small-scale producers across the country continues to be a key challenge to ensuring access to inputs and agricultural services, particularly in the context of weak capacity o f the sector ministry and poor coordination among the main actors. Other important developments in the agriculture sector during the first PRSC/G series included the enactment of the land law, the privatization of some of the tea factories and estates, the development of a time bound and monitorable Export Promotion Action Plan, and the development of a results-based MTEF, and the operationalization of Animal and Resources Development Authority (RARDA) and Agricultural Development Authority (RADA) to facilitate 83

96 provision of extension services to producers. Although all these developments are seen as significant achievements and together they have enhanced the overall sector capacity and implementation, the Government of Rwanda considers the land reform as the most significant and complex reform introduced during the PRSC/G series. The issue of ownership of land in Rwanda is and will increasingly so be of outmost importance if the population continues to grow at current rates (although Government of Rwanda is considering ways to address the issue of rapid population growth). Prior to the land reform, land belonged to the state whereas now land can be owned. Although some issues of land registration still remain, the land reform is considered by Government of Rwanda as a major achievement. In addition, Government is putting increased emphasis on irrigation, soil and water management and conservation with the aim of reducing the heavy reliance on rain-fed agriculture, and the significant negative impact rainfall variability has had on agriculture GDP. Also, the sector struggled in the last few years to increase usage of modern inputs in the sector due to lack of knowledge, high prices, inadequate supplies, and lack of credit. The Government of Rwanda liberalized the market for fertilizer imports to encourage private sector participation. This led to an increase in the number of fertilizer importers but due to low demand by farmers, the quantity of fertilizer imports peaked at 7,349 tons, in 2005 and remains far below the target of 63,000 tons. Liberalization of the fertilizer market to enable involvement of private importers has eased the macro-policy constraints to fertilizer demand. However, the underlying micro-level constraints linking demand and supply still persist. As a result, the big commercial farmers have benefited more compared to small-holders from a liberalized fertilizer market. Nevertheless, there are signs that commodity based cooperatives are now playing increasing roles, to address the micro-level constraints, by improving access of small-holders to fertilizers, with bulk purchases at wholesale prices, credit guarantees for farmers and associated extension services. Key Policy Area 3: Public Sector Underpinnings for Improved Service Delivery Public Expenditure Management, Transparency and Accountability, and Monitoring and Evaluation Public Sector Underpinnings for Improved Service Delivery - Public Expenditure Management Reforms: The reforms supported by the first PRSC/G series have been significant and Government of Rwanda recognizes that the expertise and support from the World Bank team, in particular as it relates to a clear dialogue, advise and help in prioritizing the sequencing of reforms helped ensure its success. First an auditor general was appointed and later followed by the establishment of an Accountant General s Office. An organic budget law was adopted under the PRSC/G series but the most significant reform under this policy area included the IMIHIGO contracts between the President of the Republic and the districts. Although this latter reform was a homegrown initiative, the support and guidance in combination with the overall dialogue in this policy area facilitated the government in its effort to ensure a successful introduction of this unique, key reform program. Theme/Sector Reform Measures Undertaken Year Economic Governance, Transparency, and Accountability 84

97 Public Organic Law on State Finance and Property adopted 2006 Financial Rwanda Expertise Scheme implemented to train government accountants/auditors 2006 Management Organic Budget Law adopted 2005 Ministerial accounts converted to zero balance in move to Single Treasury Account 2005 Accountant General appointed 2004 Auditor General appointed 2003/04 Public Sector Underpinnings for Improved Service Delivery Transparency and Accountability Reforms: In terms of transparency and accountability, use of citizens report cards and citizens score cards were successfully piloted, the media was liberalized, the Gacaca process evolved, financial policies and procedure manuals were finalized, adopted and published, consolidated financial statements introduced, and a procurement law published. However, the procurement law was delayed multiple times and proved a difficult and frustrating process which Government of Rwanda partially attributes to lack of clarity from what was needed. In this regard, the support by the PRSC/G series was less successful and compared to the success in dialogue and support under the PFM, the procurement law process was ineffective. Nonetheless, the Government of Rwanda considers the overall accomplishments in this sector during the first PRSC/G series significant, and many significant milestones were successfully met as shown in table below: Theme/Sector Reform Measures Undertaken Year Economic Governance, Transparency, and Accountability Transparency Procurement code gazetted 2007 and Financial policies and procedures manuals finalized, adopted and published 2006 Accountability Public Procurement Law submitted to Parliament 2005 Use of citizen report cards piloted 2005 Gacaca process full under way 2004/05 Nat'l Decentralization Steering Committee & Nat'l Decentralization Implementation Secretariat operational 2004 Strategic plan to combat corruption elaborated 2004 Media further liberalized 2004 Public Sector Underpinnings for Improved Service Delivery Public Monitoring and Evaluation Reforms: Reforms undertaken in monitoring and evaluation included the sector issues papers, the sector cluster working groups that then feeds into the Government of Rwanda s Annual Progress Report, introduction of results-based MTEFs in key sectors, and introduction of monitoring and evaluation mechanisms to improve M&E within the ministries. Also, a prior-action trigger of establishing an Ombudsman office and local mediators were successfully completed and is now operational. Nonetheless, further work under this key policy area will continue to be of focus under the next EDPRS and second PRSG series. Also, bi-annual Joint Budget Support Reviews, spearheaded by the World Bank but now with full coordination by the External Finance Unit of MINECOFIN were introduced and have significantly strengthen dialogue, coordination, and harmonization among budget support donors and Government of Rwanda and has helped Government of Rwanda lower transaction costs and coordination time. MINECOFIN also established the Intergovernmental Relations Unit following the full scale-up of the decentralization process in 2006 to ensure proper management and controls of the increasing fiscal transfers to districts. Also, Public Expenditure 85

98 Tracking surveys were completed and Public Expenditure Reviews (PERs) undertaken, with the ongoing support under the next PRSG series to make the PERs part of the annual budget cycle. Theme/Sector Reform Measures Undertaken Year Economic Governance, Transparency, and Accountability Monitoring Monitoring indicators under development at the decentralized level 2005 MINECOFIN reorganized to better handle monitoring and evaluation 2005 PRSP Annual Progress Reports (APRs) produced 2004/05 Sector Issue Papers (SIPs) produced 2004/05 MTEFs for key sectors produced 2004/05 Overall Progress in the Allocation of Public Expenditures to key priority sectors identified under PRSP and supported by the PRSC/G series: Under the first PRSC/G series, public spending rose from 21% of GDP in 2002 to 27.8% in 2006 and remained closely aligned to the priority areas and much achievement can be noted both in terms the PRSC/G series achieved triggers, expected outcomes, and MDGs. Nonetheless, progress still falls short of what is needed to achieve all the MDGs or meet internationally recommended levels of expenditure. Spending on the priority sectors (education, health, agriculture, and infrastructure) has been increasing in recent years. In general, over the period 2002 to 2006, Government protected the priority sectors from volatility in the inflows of external assistance and other shortfalls in revenues. In terms of overall spending trends, there has been a pronounced shift in recent years from recurrent to capital expenditure, a reflection of the increased level of project financing relative to budgetary support in the infrastructure and agriculture sectors. For further details about public spending allocations trends, please refer to Annex Program Risk What are the risks that the development objectives will not be achieved in future or maintained, and what is the potential impact if these risks materialize? (Section 1.2.3) The original major risks to achievement of PRSP goals were identified in 2004 and divided into three categories: country risks; program risks; operational risks. These risks are summarized below: Country Risks. The first PRSP in 2004 acknowledged Rwanda s recent history and its location in a highly unstable central African region which could come to pose a potential threat to the Government of Rwanda in achieving its development objectives. Though there has been an increase in the risk of remobilization of ex-far and interahamwe elements in the DRC, there have also been positive actions taken by both parties to minimize risks, including enhancing the joint verification mechanism as previously agreed by the parties in November 2003, and multiplying political and security initiatives to mitigate current tensions. There has also been an increasing willingness of the international community to put in place the security framework necessary to preserve peace in Rwanda and neighboring countries, as shown by the international support offered to the Rwanda for elections held in 2004, strengthening of the United Nations Operation in the DRC, and deployment of the United Nations Operation in Burundi. As such, Rwanda s internal security and 86

99 political situation remain stable. Following the peaceful presidential and parliamentary elections in 2003, the Government of Rwanda has and continues to demonstrate its commitment to good governance. A minister in charge of good governance was appointed, the Office of the Ombudsman was established, and elections of mediators and national women councilors were successfully completed in July Program Risk. The first PRSP in 2004 identified three main program risks to be addressed during the PRSC/G series related to predictability of donor funding, the Government of Rwanda s ability to mobilize further grant financing, and debt sustainability concerns. As such, a November 2003 MOU signed between the Government of Rwanda and donors providing budget support aimed at increasing the timeliness and predictability of funding and at assisting in mitigating such risk. The ability to mobilize further grant financing, due to debt sustainability concerns was seen at the outset of the PRSC/G series as a potential real challenge for the Government of Rwanda. However, Government of Rwanda was successful in raising a substantial amount of grant in the period, an increase in grants of 16% in real terms (see Annex 8) and as such, this risk never materialized. Furthermore, the World Bank showed its commitment and fiduciary responsibility by committing to early disbursements of its PRSC/G series (within the limits of IDA grant allocations), which helped the Government of Rwanda in its appeals to the other budget support donors to follow suite (as it did in 2007 which Government of Rwanda considers a major accomplishment). However, the long-term goal of reducing dependence on foreign aid has also been identified as a risk but to this end the Government of Rwanda shows a strong commitment to increasing its domestic tax base which can be seen in the data of a consistent increase in the period especially in tax revenues (see Annex 8). Furthermore, the Government of Rwanda to this end has also focused on developing a strong growth strategy, including the introduction of an export promotion policy and improving the business climate in private sector, earning Rwanda a Top 10 spot in 2006 Doing Business Report. It should be noted however that the Government of Rwanda acknowledges that further growth will remain of essence during the next EDPRS (and PRSG series) to ensure significant impact on poverty and that key challenges to attract FDI (foreign direct investment), improve productivity of a struggling agriculture sector, develop key industries, further promote export of goods and services (including decreasing volatility in core exports such as tea and coffee), and significantly improve the human capital must be addressed. It is also of importance to note in this context that while Government of Rwanda is trying to lower its aid dependency (part of its EDPRS objectives) it also recognizes that its current level of grants will not be sufficient to meet its aggressive objectives for growth and development. As such, a key challenge going forward is how Rwanda can seek other sources (credit) in particular for capital intense investment projects in a post-hipc financing climate. Operation Risk. The main risks to successful implementation in the PRSP in 2004 included weak capacity and the need of Government of Rwanda to strengthen its fiduciary framework. The ambitious targets set by the Government of Rwanda indicated its optimism and commitment. However, under the PRSC/G series, additional funds were to be transferred to the district level, where weak capacity and weak financial reporting in local administration were recognized as a potential risk. Specifically to mitigate the risk of weak capacity, the Bank and the Government of Rwanda designed the Public 87

100 Sector Capacity Building (PSCB). The project aimed at building the capacity of ministries and local staff involved in PRSC/G implementation, primarily through targeted training. Also, the Decentralization & Community Development Project (DCDP) included key capacity building activities, at the local level. However, regarding financial reporting the Government of Rwanda acknowledges that despite major improvements, including its alignment of district MTEFs to the national budget, this area continues to be weak and needs further strengthening during the next PRSG series. Similarly, the Government of Rwanda was expected to implement an action plan following up on the Country Procurement Issues Paper s (CPIP) recommendations, to improve the country s public procurement system and procurement capacity. However, this process was delayed several times and was not completed until the end of the PRSG II, a process that Government of Rwanda found frustrating as the delay was more due to a breakdown in the communication between the Bank and the Government of Rwanda as opposed to lack of political will to meet this key PRSG trigger. Government of Rwanda recognizes the delay of the Procurement Law as one of the few areas that were less successful during the PRSC/G series and which highlights the importance of clear communication and quality of advice. For example, the Government of Rwanda found that the PFM reforms were successful much thanks to the Bank s high quality advice and clear communication and further illustrates the point of importance placed by Government of Rwanda on quality dialogue and guidance. In summary, Government of Rwanda assesses that the perceived risks to the PRSC/G series outcomes have to a large extent been mitigated and addressed. As can be seen by the results during the period, the risks identified as a threat to PRSC/G series outcomes have not materialized. Furthermore, Government of Rwanda assesses that the sustainability of outcomes reached during this period is minimal as the processes put in place during the PRSC/G series remain fully supported by the Government of Rwanda and will continue to be strengthened as part of the Government of Rwanda s EDPRS with further support from the next PRSG series Program Success Factors What are the important success factors that played a role in the achievement of the development objectives? (Section 1.2.4) The first key success factor to the implementation of the PRSC/G series has been identified to be Government of Rwanda s commitment to the program. This is evident in the commitment in terms of resource allocation to the priority sector as can be seen in expenditure data and the efforts to improve financial and procurement management. Furthermore, the Government of Rwanda s commitment is evident in the many key innovative programs that the Government of Rwanda introduced with support from the PRSC/G series, such as Performance-Based Contracting, Capitation Grants, Mutuelles, and Community Health Schemes. Further supporting the success of the Government of Rwanda was the World Bank s ability to stay focused on a few, high-impact programs specifically under the first two PRSC/Gs. This focus helped Government of Rwanda stay on track on its agenda and allowed for intense dialogue and practical hands-on support. Although this became less true under PRSG III, where more programs were added and therefore the dialogue and practical support diluted, overall Government of Rwanda considers the focus of the PRSC/G series a key contributing factor to the Government of Rwanda s ability to deliver on its objectives. 88

101 The second key success factor were the World Bank s commitment to early and predictable disbursements of funds that both made budgeting easier for Government of Rwanda and that also encouraged other donors to follow suite. By showing its commitment to early disbursements (which in PRSC/G I and PRSG II occurred in the fourth quarter of the year prior to the budget calendar year) the World Bank set a high standard of fiduciary responsibility and by 2007 all major budget support donors agreed to disburse no later than the second quarter of Government of Rwanda considers this one of the key achievements of the PRSC/G series. The third key factor of success during this period was the introduction of the bi-annual Joint Budget Support Reviews (JBSR) led on initiative by the World Bank and that significantly helped streamline donor discussions, reduced transaction costs in dealing with development partners, and improved the overall harmonization and aid alignment agenda. Also, the introduction of sector reviews further strengthened the sector dialogue. Although the timing of the sector reviews could be improved to better feed into the general JBSR (sector reviews today often occur after the JBSR in April each year) and improvement in cross-sector dialogue will be a focus during the next PRCG series, the significant progress during the first PRSC/G series in this donor alignment is considered by Government of Rwanda as one of the greatest accomplishments during the first PRSC/G series. The fourth key success factor includes improvements under the Government of Rwanda s major decentralization efforts and the strengthening of the quality of service delivery at local level. In 2006 the Government of Rwanda implemented both a major territorial reform (reducing the number of provinces from 13 to five, the number of districts from 106 to 30, the number of secteurs from 1,545 to 416) and a major push on fiscal decentralization. To ensure ownership of the decentralization process and its objectives and to provide clear incentives to local government, the Government of Rwanda introduced the IMIHIGO contracts between the President and the districts, directly linking performance to outcomes. Although capacity and weak financial reporting on local levels remain a concern, the IMIHIGO, unique to Rwanda is considered by Government of Rwanda as one of its key accomplishments and the dialogue and support during the PRSC/G series of its preparation and implementation contributed to its success. Furthermore, the Bank provided crucial technical assistance for the implementation process and in joint effort with MINALOC produced a key decentralized service delivery policy paper. Furthermore, the World Bank played a key role in the introduction of block transfers (to help districts in day-to-day operations) and of earmarked transfers (such as capitation grants) and performance-based contracts within health sector. The fifth key success factor included the improvement in planning, budgeting and reporting, including the introduction of results-based MTEFs in key sectors such as health, education, and water (energy has an MTEF but its links to results remain weak) and the alignment of district MTEFs to national programs. This was accompanied by budget reforms that took place in 2007, with a major workshop set up by Ministry of Finance and with support from the World Bank helped create commitment to the proposed reforms, increase ownership of the process at district level, and served as a useful tool to channel feedback from districts back to the Ministry of Finance. The alignment of districts planning process with the government s budget cycle, as well as consultation with civil society (although still limited) to guide the policy development process, 89

102 from a curative to preventive approach may have also contributed immensely to the current level of success. Also, during the PRSC/G series the Government of Rwanda completed several Public Expenditure Reviews (PER) in key sectors, and with support from the World Bank laid the foundation of the institutionalization of PERs into the annual budget cycle (which the World Bank continues to support through its second PRSG series) Effectiveness of Government of Rwanda and World Bank in the PRSG I/II/III Implementation Process The effectiveness of Government of Rwanda and the World Bank in preparing, implementing, monitoring and evaluating the PRSG series. The specific questions to answer in this regards are (sections 1.2.6, 1.2.7, 1.2.8) This section looks at the effectiveness of Government of Rwanda in the preparation of the PRSG series, its implementation, monitoring and evaluation. The specific questions answered in this section includes the quality of work done by Government of Rwanda and World Bank with respect to the preparation implementation, monitoring and evaluation of the PRSG series, the level of compliance with prior-action triggers and finally the effectiveness of key strategies pursued Quality of the PRSG I/II/III Preparation, Implementation & Monitoring & Evaluation Process What is the extent to which Government of Rwanda ensured quality of preparation, implementation, monitoring and evaluation of the PRSG series? (Section 1.2.6) Preparation & Implementation: MINECOFIN was responsible for implementing the PRSC/Gs and for coordinating the completion of actions. MINECOFIN s Development Planning Unit is responsible for overall monitoring of the Government of Rwanda s poverty reduction programs and the Bank worked closely with the unit and with the Government of Rwanda in general on monitoring and evaluation of the PRSC/G program. Furthermore, in 2006 the Intergovernmental Fiscal Relations Unit was created to support the intergovernmental fiscal transfers from MINECOFIN to districts. Also, MINECOFIN s Budget Monitoring and Reporting Team, responsible for ensuring that component sector spending plans developed with PRSC/G support were incorporated into the national MTEF and the subsequent budget became key in tracking progress of the implementation of the PRSC/Gs. Also, the External Finance Unit within the ministry was put in charge of aid harmonization and is now in charge of donor coordination, a process successfully put in place during the PRSC/G series. In addition, the role of line ministries were strengthened during the PRSC/G series and their role in planning, budgeting, and coordination was improved. Government also completed an Aid Policy document prepared through an extensive process of consultations involving key stakeholders in Rwanda s development. The Aid Policy, which aims to increase aid effectiveness, articulates the government s vision for improved aid management and incorporates many of the elements of the Paris Declaration on Aid Effectiveness. It defines the framework for negotiation and management of aid that respond to Rwanda s development needs, and outlines the Government s expectations and preferences for the types of external assistance 90

103 Rwanda needs, which includes a clearer division of tasks between government institutions and departments. The policy forms a basis for attracting increased volumes of assistance over the medium term. Monitoring & Evaluation: In the area of monitoring and evaluation Government of Rwanda carries out it own monitoring in the form of Annual PRSP Progress Reports (APRs) that have been made public. Also, Bank-Fund Joint Staff Advisory Notes (JSANs) were prepared as well as internal audits done by the Audit General s office (only in 2008 did PricewaterhouseCooopers start providing technical assistance to the Audit General s office). The APRs documents indicate that PRSC/G series progress in structural and macroeconomic reforms and in establishing the institutions for the effective implementation of the Government of Rwanda s PRSP. Furthermore, the JSANs further indicated that progress in implementation had been satisfactory overall. Also, an independent Accountant General Office to manage fiduciary aspects of the Government of Rwanda became operational under the PRSC/G series. The AG office reports directly to Pariament. In Citizen Report Cards (CRCs) and Community Score Cards (CSCs) were piloted for education and health and adopted in 2006 as a tool to help monitoring accountability and assure citizens voice in service provision. Monitoring and evaluation done and/or supported by the World Bank included PETS and PER of specific sectors (health, education, water & sanitation, and social protection). Also, Country Status Reports were completed for health and education in joint collaboration between Government of Rwanda and the World Bank. Furthermore, under the PRSC/G series, the following progress was made in harmonization of budget support: Implementation of the first PRSP was supported by the work of cluster thematic groups composed of representatives of donors and related ministries and government agencies. These clusters, charged with developing sector strategies and facilitating the implementation and monitoring of the PRSP and related programs, have enhanced donor coordination and harmonization at sector levels. The Budget Support Harmonization Group has served to enhance collaboration and is now an institutionalized mechanism for dialogue between Government of Rwanda and development partners. In 2004, the Government of Rwanda and budget support donors agreed on a common assessment framework for public financial management. A harmonization calendar was also elaborated (and is updated on a periodic basis), which provides the timeline for key reviews and identifies periods when donors agree not to hold missions in order to minimize the burden on government. During the course o f the implementation of the first PRSC/G series, three main reviews were instituted (as outlined and agreed in them Partnership Framework). These are: Joint Budget Review. There are two reviews: one in April takes place once the budget execution report for the previous year i s available; and another in September once the Government of Rwanda s draft Budget Framework Paper for the coming fiscal year is available. This April review is backward-looking, focusing on progress against plans and targets for the previous year. The September review discusses planned sectoral and subsectoral budget allocations and expenditures at the national and district levels, in view o f the links to the PRSP agenda for growth, poverty reduction, and human development outcomes. 91

104 Joint Public Financial Management Review. The public financial management review focuses on the Government of Rwanda s progress on its public financial management reform programat the core of donors budget support programs-and priority actions for the coming year, as well as goals for the medium-term. This review is undertaken during the Joint Budget Review. Sector Reviews. Sector cluster groups (first established in 2002 as an implementation mechanism for the PRSP) lead sector reviews, aligning the timing of such reviews with the PRSP and budget cycles. These reviews feed into the Annual Status Reports (ASR) completed by Government of Rwanda each year to monitor PRSP progress. Each major sector has a cluster around which input from relevant government agencies, donors, and other stakeholders i s organized. A lead government agency and lead donor coordinate the cluster s activities. The education and health sectors have been particularly active; the agriculture and water clusters have made tremendous progress over 2005 and 2006; energy, part of the infrastructure cluster, has had a more difficult time given the focus on solving the immediate electricity crisis and due to its cross-cutting nature. For 2006, the SWGs established for EDPRS development have taken the lead on sector reviews. As part of the monitoring and evaluation process undertaken during the PRSC/G series, a number of surveys were undertaken at the household level and also of firms and industry that has enabled the estimation of outcomes and trends in key indicators. For example, there are the two household consumption surveys (EICV 2001 and EICV 2005). A second and third Demographic Health Survey was completed in 2005 and 2008 to complement the one completed in Citizens Report Cards have also been part of the monitoring instruments of the PRSP; and the ubudehe process is used to implement participatory assessment o f community-level projects. In addition, surveys have been completed o f the manufacturing and industry sectors as well as the informal sectors. All these recent surveys will facilitate the establishment of baseline information to evaluate the progress to date during the first PRSC/G series and set the baseline for the second PRSG series and the EDPRS (the second PRSP). There have also been institutional reforms to promote greater coordination between statistics and planning. The recent creation of the National Institute o f Statistics (NIS), by merging the former Statistics and Census department, and expansion of the mandate of the Strategic Planning Unit (SPU) to include strategic planning (as opposed to strictly monitoring o f the PRSP), will help improve overall M&E efforts going forward Compliance with agreements The Government of Rwanda succeeded in complying with most of the PRSC/G series prior-action triggers. As the table below shows, the Government of Rwanda met all of its PRSC/G I triggers. Prior Actions and Achievements for Disbursement under PRSC/G Series PRSP AREA/ PRSC/GI PRIOR ACTIONS OBJECTIVE Private Sector-led Pfunda Tea Factory CNPE Kabuye brought to the point of sale to qualified buyers. Growth Improve Access of the Complete document on a fiscally sustainable sector strategy that indicates Population to Basic Government of Rwanda s preferred scenario for achieving Universal Primary Education of Acceptable Completion. Agree how the 2005 Budget and MTEF will reflect this Quality decision. (Completed document containing decision and process.) 92

105 Improve the Performance of Health Services Improve Public Expenditure Management Improve Transparency and Accountability Improve Monitoring and Evaluation Carry out performance based payment schemes for high impact services in Butare and Cyangugu with donor funding; make provisions for transferring at least 50% of the cost to 2005 budget; increase DPT3 coverage to 80%. Maintain adequate macroeconomic framework Budget Framework Paper available, consistent with macro-framework, medium term expenditures framework and PRSP priorities; and detailed output oriented medium term expenditures frameworks for education and health budget execution report submitted to Auditor General and presented to Parliament. Organic Budget Law adopted by Cabinet and submitted to Parliament. Public Procurement Law and recommendations of the Country Procurement Issue Paper (CPIP) are adopted by Cabinet and submitted to Parliament. Law establishing the Ombudsman office is published in the official Gazette and mediators elected in all cellules and sectors. PRSP Progress Report (APR) reviewing 2 nd year of PRSP implementation completed. Draft questionnaires of citizen report cards survey available. For the prior-action triggers for the PRCG II, most were achieved with some adjustments. For example, the private sector-led growth trigger was achieved with adjustments to the program. Sopratel (hotel), Rwandex (coffee exports), and rice added to the privatization program. (Government of Rwanda decided to redesign the privatization program for the tea sector, which was previewed as the trigger in PRSC/G I Program Document, to make it more effective). Furthermore, the two Transparency and Accountability triggers were achieved with a few revisions. The first trigger was the Organic Budget Law published in Official Gazette; finalize, adopt and publish Financial Instructions; draft manual of financial management procedures prepared. However, in reviewing the Organic Budget Law for passage, Parliament discovered a contradiction with the English version of the Constitution. Thus, the trigger was revised to allow Parliament the time to seek a Constitutional amendment to allow for passage of the law. Passage and publication of the law and accompanying Financial Instructions would follow. Once the law and instructions were promulgated, the Government of Rwanda would prepare the manual of financial management procedures, which was dependent on the substance of the law. The second trigger as previewed in PRSC/G Program Document was, Public Procurement Law complying with best practices published in the Official Gazette. However, Parliament conducted an in depth discussion of the Public Procurement Law, which took longer than originally envisaged. For expediency, the Government of Rwanda has submitted a complementary draft law on the regulatory framework that will be discussed in conjunction with the Public Procurement Law. It was understood that the passage of both laws would be the basis for Rwanda s modern procurement code. Monitor and evaluation triggers were also achieved but it should be noted that the citizens report cards were modified to reflect Government of Rwanda s piloting approach to M&E, to ensure proper capacity building and institutionalization of the citizen report card process. Full baseline expected by PRSP AREA/ OBJECTIVE PRSG II PRIOR ACTIONS 93

106 Private Sector-led Growth Improve Population Access to Basic Education of Acceptable Quality Improve the Performance of Health Services Improve Water Sector Performance Improve Energy Sector the Performance Improve Public Expenditure Management Improve Transparency and Accountability Improve Monitoring and Evaluation Good faith negotiations reached for the privatization of Rwandatel, Rwandex and Nshili- Kivu tea plantation and initiate privatization process of rice factories of Rwamagana, Gikonko and Bugarama. MTEF ceilings and 2006 Budget Framework Paper are consistent with the sector financing strategy; Present official government draft budget document to all stakeholders in September Carry out a comparative review of the two pilot schemes and ensure 2006 budget covers at least 75% of their cost. MINITERE/DEA has developed guidelines to assist districts in contracting private operators for managing new or rehabilitated systems; management contracts have been signed in at least 1 district in each of 4 pilot provinces Approval by RURA (Rwanda Utilities Regulation Agency) of revised Electrogaz tariffs and Electrogaz Management Contract performance indicators adjusted. Maintain adequate macroeconomic framework. Submitted draft 2006 budget law to cabinet, consistent with macro-framework, detailed and output-oriented medium term expenditure frameworks for education, health, water, and energy, and PRSP priorities 2004 budget execution report submitted to Auditor General and presented to Parliament. Organic Budget Law adopted by Lower Chamber; Office of the Accountant General established; and study commissioned to determine ways of supporting its operationalization; Government commissions Capacity Needs Assessment for accountants and internal auditors in Government. Revised draft public procurement law submitted to Parliament establishing a new independent regulatory body, notably with responsibility for: (a) provision of advice to contracting entities; (b) preparation of amendments to the legislative and regulatory framework and implementing regulations for public procurement; and (c) provision of implementation tools and documents to support training and capacity building of implementation staff. All consistent with international best practice, specifically the OECD Development Assistance Committee and COMESA public procurement guidelines. Publication of the Ombudsman office action plan. Produce APR on 3 rd year of implementation. Publish pilot citizen report card surveys on identity cards and health and education services. Government of Rwanda also ensured that most triggers for the PRSG III were achieved. The trigger under private sector-led growth was achieved but the trigger previewed in PRSG II Program Document, Good faith negotiations reached for Gisakura, Kitabi, Mata, Shagasha tea factories and Scierie de Wisumo and privatization process of Gisovu, Nyabihu, Rubaya, Muindi tea factories, was replaced. Privatization of the Nshili kivu, Nyabihu and Rubaya factories was completed; the remaining 6 factories were under rehabilitation and restructuring to ensure that a reasonable strategy was developed to enable credible strategic partners to participate in their privatization. Given this change in strategy by the Government of Rwanda, the focus of the PRSG III prior action became microfinance and reforms in the agriculture sector in light of the importance of these two areas to growth. The trigger under improvements for performance of health services was achieved and even exceeded with Performance Based Schemes expanded to all 12 previous provinces (consolidated into four regions per territorial reform). Also the trigger for improvement of water sector exceeded minimum requirements. However, the energy sector 94

107 trigger and the trigger for citizens report cards were modified while the procurement law trigger was again delayed (as described in previous sections). All other triggers were achieved as required. PRSP AREA/ OBJECTIVE Private Sector-led Growth Improve Population Access to Basic Education of Acceptable Quality Improve the Performance of Health Services Improve Water Sector Performance Improve Energy Sector the Performance Improve Public Expenditure Management Improve Transparency and Accountability Improve Monitoring and Evaluation PRSG III PRIOR ACTIONS Adoption of microfinance action plan and RARDA, RADA are at least 25% staffed and operational. MTEF ceilings and 2007 Budget are consistent with the sector financing strategy; present official government draft budget document to all stakeholders in September Implement recommendations of comparative review of performance based schemes for health centers and expand scale up to at least 3 regions with government funding. 10% of rural water supply systems are managed by local private operators. Adoption by Cabinet of revised electricity tariff that balances protection of industrial consumers and cost recovery requirements. Maintain adequate macroeconomic framework. Submit draft 2007 budget law to cabinet, consistent with macro-framework, detailed and output-oriented medium term expenditure frameworks for education, health, water, and energy, and PRSP priorities budget execution report submitted to Auditor General and presented to Parliament. Finalize, adopt and publish Financial Policies and Procedures Manuals. Public Procurement Code complying with best practices adopted by Parliament. The Office of the Ombudsman reviewed by sampling at least 15% of the declaration of assets for public sector staff. Produce, publish and disseminate the 2005 PRS report budget includes funding for Citizen Report Card program to be conducted in each of the 30 districts Effectiveness of key strategies How effective were the key strategies developed and implemented during the PRSG series? Were the organization and management arrangements effective? Could the constraints have been recognized and solved earlier? (Section 1.2.8) Rwanda s Poverty Reduction Strategy (PRS), published as a PRS Paper (PRSP) in July 2002, elaborates the Government of Rwanda s vision for achieving the MDGs, including reducing poverty by half by It articulates a medium-term program ( ) as a first step toward the Government of Rwanda s Vision2020, which includes ambitious targets of increasing GDP per capita to US$900 (from US$230); reducing the number of poor people to 25% of population (from 60%); increasing life expectancy to 65 years (from 49 years); and increasing literacy rates to 90% of the population (from 48%). Vision2020 outlines national reconciliation, domestic and 95

108 regional security, good governance, and economic transformation as overarching challenges to achieving these ambitious goals. Poverty Reduction Outcomes achieved under PRSG: Preliminary estimates from the second Household Survey (EICV) conducted in indicate that between 2000 and 2005/6 income poverty declined from 60.4% to 56.9% (see table below). Rural poverty declined from 66.1% to 62.5%; and poverty in the City of Kigali declined by 4.2% points. Poverty in Kigali now stands at 20.2%, while the Southern Province has the highest poverty headcount of 67.3%. In addition, inequality, as measured by the Gini coefficient, increased from an already high level of 0.47 in 2000/01 to 0.51 in 2005/6. One o f the major factors determining the trends in spatial disparities in poverty and the increase in urban-rural inequality has been the continued low level o f productivity in the agriculture sector, the principal economic activity in the rural areas, and the frequent unfavorable weather conditions in a predominantly rain-fed agricultural production system. The agricultural sector grew rapidly in the early post-genocide years with the bringing of idle land and neglected farms back into production as refugees and displaced persons returned to their homes and farms. Once this process was over, increases in productivity would be critical for agricultural growth. However, productivity growth could not take place due to lack of progress in the use of modem inputs thus slowing agriculture growth. The action plans prepared within the context of the Strategic Plan for Agricultural Transformation (PSTA) and preparations for the EDPRS have focused both on investments and other interventions to improve agricultural productivity and should result in increased growth and poverty reduction in rural areas. 1.3 The Appropriateness of Bank Assistance The World Bank has had a long standing relationship with Government of Rwanda in-terms of financial and technical assistance. In this part of the report, the importance of the assistance offered Government of Rwanda in implementing PRSG Series as well as the commitment of the World Bank in honoring it fiduciary responsibility is assessed. 96

109 1.3.1 The importance of Bank s assistance To what extent did services provided by the World Bank ensure quality at entry and support effective implementation through appropriate supervision toward achievement of development outcomes? (Section 1.3.1) The first operation under the series, approved before the country reached its HIPC Completion Point, was a mix of credit (US$15 million) and grant (US$50 million). The second operation followed HIPC Completion and thus was completely grant-funded (US$55 million) so as not to reverse the effects of the debt relief. The third operation, which followed the approval of further debt relief under the Multilateral Debt Relief Initiative (MDRI), was also fully grant-funded (US$50 million). Regarding schedule, PRSG III disbursed later than previous disbursements under the PRSC/G series following agreement with Government of Rwanda and other donors. This agreement followed increased pressure on other budget support donors that had in previous years disbursed late in the year, hence, significantly increasing unpredictability of funding. This increased pressure on other donors came after the initiative by World Bank to show its commitment to fiduciary responsibility to disburse early (December 2004 and 2005), hence setting a standard. So in 2007, World Bank agreed to disburse during second quarter of 2007 together with all other donors. This is, according to Government of Rwanda, one of the World Bank s greatest contributions under the first PRSC/G series. In terms of technical assistance, the World Bank receives high remarks from Government of Rwanda officials for the original priority sectors (education, health, water & sanitation, and energy) and the Government of Rwanda is highly satisfied with the assistance from the World Bank. Also, the World Bank ensured high-quality technical assistance as part of the decentralization process by hiring the former Director of Budget in Australia. Less satisfactory were the technical assistance given to newer priority sectors such as export promotion and transport but this was identified more as a financial problem where funding was not available to find the same quality of technical assistance and not a problem of commitment or appropriateness of the World Bank s assistance. Also, Government of Rwanda acknowledges the significance of the PRSC/G series and overall, the entire series was a success in terms of support, dialogue, advice, technical and financial assistance, flexibility, and outcomes. However, Government of Rwanda notes that as the success of the first PRSC/Gs led to expansions of the PRSG III, the focus became somewhat diluted and that the latest PRSG (hence the World Bank team that supported it) become overstretched and could serve as a lesson learned for the next PRSG series. Another key achievement of the World Bank s assistance (although less so during PRSG III) was its focused dialogue on a few key high-impact interventions. From the Government of Rwanda point of view, this was of essence to the success of the PRSC/G series objectives. Dialogue remained focused, advice precise, clear, practical and timely, and helped ensure that specific highimpact programs were well prepared, implemented, scaled-up and improved Fiduciary responsibility To what extend did the World Bank pay sufficient attention to fiduciary responsibilities and safeguards, including procurement reviews, disbursements, review of budget and expenditure 97

110 information and audits, environmental impact assessments, monitoring of progress of key indicators and attention to results? (Section 1.3.2) also see (Section under Monitoring & Evaluation) As part of the PRSG series the World Bank had a fiduciary responsibility together with other donors for ensuring that safeguard measures were put in place to reduce risk of poor implementation outcomes through procurement review, disbursements, review of budgets and expenditure information, audits, environmental impact assessments, progress monitoring of key indicators and attention to results. World Bank showed strong fiduciary responsibility by significantly reducing the unpredictability of disbursements by committing to early disbursements and encouraging other donors to follow suite. Reviews of budget and expenditure information were done through the JBSR, PER, and PETS, and the regular monitoring of key indicators. However, Government of Rwanda and World Bank did not fully agree on the procurement process and as such, the procurement law was delayed and not finalized until However, to a great extent, this monitoring performance of Government of Rwanda was fulfilled to a large extent, sometimes with support of other development partners. This was done through inputs made by development partners through participation in meetings, reviews, joint donor monitoring program and direct technical assistance to the Government of Rwanda. Furthermore, the support of the decentralization process by the World Bank is also seen as a key accomplishment during the PRSC/G series where the Bank play a key role in the development of key grants and transfers to districts, including the capitation grants, block transfers, performance-based contracting and the support in the form of a joint decentralization service delivery policy note in collaboration with MINALOC. In addition, the dialogue in the public finance management process proved essential and the World Bank team was excellent in helping the Government of Rwanda sequencing reforms based on priority and in providing clear advice. However, the dialogue between the Bank s procurement team and the Government of Rwanda was less effective and more confusing, resulting in many revisions and delays. Overall however, the World Bank support was extremely hands-on (and less consultative) and as such ensured significant practical value in ensuring progress, strong dialogue and ownership sharing in the common objectives. 2.0 Challenges of the Implementation Process In spite of the relative success of the implementation of PRSC/G series challenges still exist that are of great concern to some stakeholders. The thinking is that, addressing these challenges will go a long way to improve the performance of the sector and perhaps outcomes in general. First, the lack of financial commitment beyond one year from the World Bank created uncertainty from year to year and remained a challenge throughout the PRSC/G series. Although Government of Rwanda commend the World Bank for its commitment to early disbursements, the uncertainty of ongoing budget support from year to year was identified as a major challenge as well as the fluctuation in the amount disbursed each year, creating both uncertainty and volatility to the financing and budgeting process. From Government of Rwanda s point of view, a commitment of 3 years of budget support as opposed to an annual commitment would have been preferred to avoid challenges provided by uncertainty, volatility, and unpredictability of budget support. 98

111 Another key challenge was the extended scope of the PRSC/G series. According to Government of Rwanda, the World Bank provided excellent technical assistance in their original priority sectors (education, health, water & sanitation, and energy) but failed to provide the same level of technical assistance to other priority sectors identified later on in the series, such as export promotion and transport. One reason mentioned for this was not the lack of commitment or competence of the World Bank but rather lack of sufficient funding to strengthen this technical assistance. 99

112 Annex 5. Comments of Co-financiers and Other Partners/Stakeholders* SUMMARY OF INTERVIEWS WITH COFINANCIERS & OTHER PARTNERS/STAKEHOLDERS APRIL 2007 Comments from government and donor stakeholders interviewed were almost universally positive regarding the experience with the first PRSC/G series. Those interviewed pointed to the building of government capacity, improved budgeting and planning, and closer donor coordination and collaboration forged through the process. Government officials expressed their preference for budget support over project support due to its ease and efficiency of implementation. Whereas project support can be ad-hoc, scattered among government and donor priorities, and subject to lengthy implementation procedures, general budget support allows for frank dialogue between the GoR and donor partners on the GoR s reform agenda and allows government to have better control over fiscal and monetary policy (versus the situation of having undisbursing project funds sitting in government accounts). While officials from MINECOFIN expressed a preference for general budget support with no protection of certain budget lines sector officials and donor representatives involved in specific sectors saw the benefit of sector budget support, to ensure that budget is dedicated to certain areas. Other donor partners praised general budget support and the broadness of the PRSC/G program, which allows the GoR and donor partners to discuss the big picture. Some donor representatives and government officials supported the idea of expanding the budget support program to additional sectors/areas (including, for example, a discussion of governance and security/defense issues). At the same time, one government official indicated that, going forward, the Joint Budget Support Reviews would need to be more focused/selective, especially if the program expands selectivity of discussion topics will be needed (e.g., rather than having sector specific presentations during the JBSR, a report on budget execution, with sector details). One government official also noted that the budget support calendar and Joint Budget Support Reviews have not cut down on the number of bilateral meetings requested of government with donors. There were frank comments in regard to the difficult areas of procurement and energy sector dialogue under the first PRSC/G series. Regarding the dialogue on procurement, government officials indicated that the Bank could have been more understanding of the GoR s position and allowed for the passage of the Procurement Code that had originally been submitted to Parliament, and then worked with the government to revise it as necessary, rather than insisting that the law meet international standards or the Bank would not accept it. Characteristic of the GoR, having come through the extensive process of getting the new Procurement Code adopted, the GoR has volunteered to be a pilot country for the Joint Venture for Public Procurement initiative coming out of the Paris declaration. Regarding the energy sector, government officials were appreciative of the flexibility of the PRSC/G instrument to adjust to changing circumstances to provide support to the GoR as it faced an energy crisis. In reflecting on why more progress was made in the water versus energy sector, officials indicated that MDG targets helped the drive toward results in water, which galvanized donor support. While there is still a need for investment projects for large 100

113 infrastructure works (e.g., roads), support under the first PRSC/G series for infrastructure sectors (energy, water) is seen as a success. Another difficult area was the ongoing discussion on budget allocations to primary versus tertiary sub-sectors in education and health. This became very clear under PRSG II, in regard to higher than expected allocations to the King Faycal Hospital in Kigali. The Bank pressured the GoR to reduce the allocation, which the GoR understood. However, officials also indicated that the Bank needs to understand where the GoR is coming from in regards to tertiary health care, and tertiary education. Good tertiary health care is needed if the GoR is to attract foreign investors from developed countries. Likewise, the GoR wants to compete as a regional hub for quality universitylevel education. Both programs are part of the GoR s overall development strategy, and donor partners need to understand this. The GoR s long-term goal is self-sustaining tertiary services. Officials and donor representatives in the health sector also noted the detrimental impact of offbudget support. Some donor representatives indicated that at the start of the PRSC/G series, the Bank could have been more sensitive to existing budget support donors/the GoR s large donor partners, though as partners came to know one another and trust was built, initial tension was overcome. Other donor partners expressed appreciation for the role the Bank played in facilitating the inclusion of other donors as budget supporters based on the Bank s program, which signaled confidence in the GoR. Donors suggested that the Bank should put in place a more systemic mechanism for document sharing so that they are easily accessible to all partners. * Based on preliminary interviews in April 2007 with selected government officials and donor partner representatives, including the Secretary General, MINECOFIN; the Director of Macro, MINECOFIN; the Minister of Health; the Minister for Science and Technology/Former Minister of Education; the Director of Planning, MINEDUC; the Secretary General, MININFRA; the Director of Planning, MINAGRI, the Executive Secretary, National Tender Board; the Director of Electricity, Electrogaz; and representatives of DFID, KFW, and GTZ (health). 101

114 Annex 6. List of Supporting Documents Area Program/ Strategy Study/Report Rwanda: Poverty Reduction Strategy Paper (July 2002) Rwanda PRSP: Third Annual Progress Report an JSA (March 2006) Rwanda PRSP: Second Annual Progress Report and JSA (March 2005) Rwanda PRSP: First Annual Progress Report and JSA (May 2004) Rwanda: Country Assistance Strategy (November 2002) Rwanda: Country Assistance Evaluation (January 2004) Rwanda: Interim Strategy Note (August 2006) Rwanda: Program Document, First Poverty Reduction Support Credit/Grant, including Letter of Development Policy (September 2004) Rwanda: Program Document, Second Poverty Reduction Support Grant, including Letter of Development Policy (October 2005) Rwanda: Program Document, Third Poverty Reduction Support Grant, including Letter of Development Policy (November 2006) Rwanda: Public Sector Capacity Building Project (June 2004) Poverty Data EICV II/Household Living Standards Survey (2006) Rwanda Poverty Assessment (2003) Core Welfare Indicators Questionnaire (2001) EICV I/Household Living Standards Survey (2000/2001) Education Education Country Status Report - Update (2006); Education Country Status Report (2003) Mapping Ways Forward: Planning for 9-Year Basic Education in Rwanda (2005) Framework for Aid Coordination: Improving the Provision & Management of External Support to Education (2005) Education in Rwanda: Rebalancing Resources to Accelerate Post-conflict Development and Poverty Reduction (2003) Literacy Survey Health Labor Market Health Survey (2006/2007) Health Country Status Report (2006) Demographic Health Survey (2006); Mini Demographic Health Survey (2008) Impact Evaluation of Community Based Schemes, Contractual Approach, and HIV/AIDS Program (Baseline conducted 2005) Health, Nutrition, and Population Country Status Report (2004) Energy Market Study of Urban Energy and Water Usage (2006/2007) Assessment of Rural High-Priority Electricity/ICT/Water Needs (2006/2007) Water Private Sector Development and Growth & Legal, Institutional and Regulatory Framework Study on Integrated and Sustainable Management of Water Resources (2005) Diagnostic Study on Human Resources and Training Needs at Central and Decentralized Levels (2005) Study on the Investment Program for Sustainable Water Resources Management & Protection of the Environment (2005) Country Economic Memorandum: Sources of Growth, Study on Manufacturing (2006) Investment Climate Assessment (2006) 102

115 Agriculture Agriculture Policy Note (2006) Public Expenditure Review (2007) Debt Sustainability Analysis (2006) Doing Business (2005, 2006, 2007) Diagnostic Trade Integration Study (2005) Transparency and Accountability Poverty and Social Impact Analysis in the Tea Sector (2005) Public Procurement Law (2007) Country Financial Accountability Assessment (2005) Financial Sector Assessment Program/Review of Observance of Standards and Codes (2005) Report of the Auditor General to Parliament (2005) Financial Accountability Review and Action Plan (2003/2004) Country Procurement Issues Paper (2004) Social Public Expenditure Review (2006) Protection Transport Transport Sector Policy Assessment (2006) Assessment of Road Fund Performance (2006) Memorandum of Understanding between the World Bank, EU, and AfDB (2006) Diagnostic Trade Integration Study Transport Component (2005) Private Sector Participation Opportunities in Transport Study (2003) 103

116 Annex 7. Map of Rwanda 104