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Are capacities for aid coordination and
management in recipient countries fit for
up-scaling of aid?- Perspectives from Rwanda

• John RWANGOMBWA
• Secretary General and Secretary to the Treasury,
• Ministry of Finance and Economic Planning,
• Government of Rwanda

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Structure of Presentation

• Thinking about capacitiesTowards an
  analytical framework
• Overview of Aid Flows to Rwanda
• Progress and challenges in the coordination and
  management of aid
• Government
• Development Partners
• Civil Society
• The need for scaling up
• Conclusions

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What do we mean by capacities in this context?
InstitutionalCapacities Policies, strategies
andimplementing tools are inplace to ensure
efficientcoordination andmanagement of aid.
Human Capacities Skilled, trained personnelare
in place to implementpolicies and
strategies,and to maintain thegovernment-donori
nterface.
Capacities
Structural / Economic Capacities Capacity of the
recipient countrys economyto absorb additional
aid with minimaldistortion (dutch disease) etc.
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Whose capacities in recipient countries?

• Recipient government
• Capacity to own, manage and implement.
• Donor agencies
• Human institutional capacity to deliver
  assistance in an effective manner.
• Other key stakeholders (e.g. civil society,
  private sector)
• Capacity to complement government advocate for
  effective use of aid, and exert ownership over
  development processes.

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Aid flows to Rwanda
Civil war and Genocide
Post-war recovery
towards longer term growth and poverty
reduction
EDPRS (forthcoming)
PRSP1
Data source OECD-DAC
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Aid flows to Rwanda

• Composition of aid portfolio (FY2005)
• Relatively small number of donors
• 40 budget support
• 60 projects, making limited use of GoR systems
• Only 49 of aid reflected in GoR budget
• Sectoral composition of aid
• Largest sector was health (12 of ODA)
• Strong focus of aid on MDG sectors

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Government capacities tocoordinate and manage aid
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Institutional Capacities (I)

• Evaluation of PRSP1 completed second generation
  PRS currently being finalised
• EDPRS will offer clear priorities with which aid
  needs to be aligned
• Costing of EDPRS will give clear indication of
  resource gaps in the medium term
• GoR Aid Policy (finalised July 2006) sets out
  clearly how aid should be provided and managed,
  with a view to ensuring fit with the EDPRS
• Preferences in terms of aid modalities and use of
  GoR systems
• Provides a framework for GoR negotiation and
  management of aid

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Institutional Capacities (II)

• Important PFM reforms ongoing
• New institutions created and strengthened
  (Auditor General, Ombudsman, National Tender
  Board, Accountant General).
• Organic Budget Law provides for improved
  budgeting and execution.
• Currently in process of preparing GoR
  consolidated accounts.
• PFM Action Plan in place to strengthen
  institutions and systems.
• Continued strengthening of sector planning and
  MTEFs
• SWAp introduced in Education sector and soon to
  start in the health sector
• Administrative reforms that led to greater
  decentralisation performance contracts
  (Imihigo)

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Institutional Capacities (III)

• New and strengthened GoR-donor structures in
  place to manage and coordinate aid
• A dedicated External Finance Unit within the
  Ministry of Finance and Economic Planning.
• Development Partners Coordination Group as a
  high-level forum for GoR-donor dialogue.
• Budget Support Harmonisation Group provides a
  single forum for dialogue with Budget Support
  donors.
• Sector-level working groups gradually assuming a
  greater role in the coordination of assistance at
  sector level.

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Institutional Capacities (IV)

• Some key challenges ahead
• Further improving sector-level planning and
  coordination.
• Strengthening of planning and budgeting at the
  district level Linking district development
  plans (DDPs) to EDPRS.
• Strengthening monitoring and evaluation
  mechanisms.
• Aligning donors to government systems

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Human Capacities

• Ongoing civil service reforms are providing
  institutions with stability and the human
  resources necessary to manage aid
• Improved salaries and conditions.
• Introduction of performance contracts.
• Skills remain in short supply, but capacity
  building initiatives are in place (Human Resource
  and Institutional Development Agency coordinates
  it)
• The challenge now is to ensure that all TAs are
  aligned with GoR priorities, and executed in a
  manner that leads to a sustainable impact on
  skills within government.
• Intensive training of professionals
• E.g. ongoing training of public accountants,
  procurement officers, planners and others

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Economic / Structural Capacities

• To what extent can Rwandas economy absorb
  additional aid?
• No evidence of Dutch disease effects on exports
  through real exchange rate appreciation.
• Efficient provision of aid plays an important
  role
• Disbursements need to be predictable (cash plan).
• Aid needs to be channelled in a way that
  strengthens absorptive capacity.
• Sectoral allocations (overcrowding in social
  sectors)
• Use national systems (procurement, reporting,
  etc )

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What about capacities onthe part of donors and
other stakeholders?
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In-country Donor Capacities

• Donor cooperation offices in Rwanda are often
  small in terms of staffing
• Unable to engage fully in policy dialogue that
  becomes increasingly important with the move
  towards partnership-based modalities (e.g. budget
  support).
• Many donor field offices are overly constrained
  by HQ-level regulations, despite the commitments
  made at international level (e.g. Paris
  Declaration on Aid Effectiveness)
• Cannot always align to the maximum extent, or
  enter into partnerships with other donors to
  increase aid effectiveness.
• Limitations on aid modalities.
• Always seeking non objections from hdqtrs

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Civil Society Capacity Issues

• Grassroots efforts in the elaboration of the
  EDPRS mean that the strategy is owned by its
  beneficiaries, but
• Literacy and skills remain a challenge to civil
  society in its role in asserting greater
  ownership over development activities, and in
  advocating for an effective use of aid.
• Relatively disorganised NGO sector reduces
  ability to implement their interventions
  effectively, though new umbrella organisations
  (e.g. NGO platform) promise to improve this.
• The role of GoR and development partners in
  building and facilitating capacity at grassroots
  level remains important.

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Why is scaling up of aid necessary in Rwanda?
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Importance of Scaling Up (I)

• Meeting the MDGs will require increased
  investment in social as well as productive
  sectors, e.g. education, health, water and
  sanitation, agriculture, infrastructure etc..
• Significant investment in productive sectors
  needed to achieve sustainable growth, and reduce
  aid dependency in long term, e.g
• Rural roads are still poor, hindering access to
  markets.
• Electricity is in short supply, and expensive
  (0.22 per KwH over three times the price of
  neighbouring countries).
• The banking sector remains shallow, and savings
  rate is low access to finance is crucial to
  private sector development.
• Agricultural transformation is another key area
  that will ensure quick poverty reduction and
  sustained development
• The EDPRS will address these constraints, but
  there is need additional external resources.

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Conclusions

• Rwanda has made significant progress in
  rebuilding its institutions in a way that
  prepares it for a much-needed scaling up and
  effective use of aid.
• Remaining constraints on the GoR side should be
  examined alongside bottlenecks and challenges
  identified on the side of development partners
  they too need to change the way they do business.
• Use of country systems (budget execution,
  accounting, procurement) by donors is a
  pre-requisite to their continued strengthening.
• Aid volume and effectiveness should be seen as
  interlinked as transaction costs are reduced,
  the ability of a recipient government to manage a
  greater volume of resources is improved.
• The capacity of an economy to absorb more aid
  will also depend on how aid is allocated to
  different sectors _ need to change the narrow
  definition of pro poor spending

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• I THANK YOU