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

John RWANGOMBWAJohn RWANGOMBWASecretary General and Secretary to the Treasury,Secretary General and Secretary to the Treasury,Ministry of Finance and Economic Planning,Ministry of Finance and Economic Planning,Government of RwandaGovernment of Rwanda

Structure of Structure of PresentationPresentation Thinking about “capacities”:Thinking about “capacities”:

Towards an analytical frameworkTowards an analytical framework Overview of Aid Flows to RwandaOverview of Aid Flows to Rwanda Progress and challenges in the Progress and challenges in the

coordination and management of coordination and management of aidaid GovernmentGovernment Development PartnersDevelopment Partners Civil SocietyCivil Society

The need for scaling upThe need for scaling up ConclusionsConclusions

What do we mean by What do we mean by “capacities” in this “capacities” in this context?context?InstitutionalCapacitiesPolicies, strategies andimplementing tools are inplace to ensure efficientcoordination andmanagement of aid.

Human CapacitiesSkilled, trained personnelare in place to implementpolicies and strategies,and to maintain thegovernment-donorinterface.

Structural / Economic CapacitiesCapacity of the recipient country’s economyto absorb additional aid with minimaldistortion (“dutch disease”) etc.

“Capacities”

Whose capacities in Whose capacities in recipient countries?recipient countries? Recipient governmentRecipient government

Capacity to own, manage and Capacity to own, manage and implement.implement.

Donor agenciesDonor agencies Human & institutional capacity to Human & institutional capacity to

deliver assistance in an effective deliver assistance in an effective manner.manner.

Other key stakeholders (e.g. civil Other key stakeholders (e.g. civil society, private sector)society, private sector) Capacity to complement government; Capacity to complement government;

advocate for effective use of aid, and advocate for effective use of aid, and exert ownership over development exert ownership over development processes.processes.

Aid flows to RwandaAid flows to Rwanda

0

100

200

300

400

500

600

700

800

900

1,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Year

US

D m

illi

on

s

Total Net ODA(2004 prices)

…of whichemergency aid andfood aid

Civil war and Genocide

PRSP1EDPRS

(forthcoming)

Post-war recovery……towards longer term growth and poverty reduction

Data source: OECD-DAC

Aid flows to RwandaAid flows to Rwanda Composition of aid portfolio Composition of aid portfolio

(FY2005):(FY2005): Relatively small number of donorsRelatively small number of donors 40% budget support40% budget support 60% projects, making limited use of 60% projects, making limited use of

GoR systemsGoR systems Only 49% of aid reflected in GoR Only 49% of aid reflected in GoR

budgetbudget Sectoral composition of aid:Sectoral composition of aid:

Largest sector was health (12% of Largest sector was health (12% of ODA)ODA)

Strong focus of aid on MDG sectorsStrong focus of aid on MDG sectors

Government capacities Government capacities totocoordinate and manage coordinate and manage aidaid

Institutional Institutional Capacities (I)Capacities (I) Evaluation of PRSP1 completed; Evaluation of PRSP1 completed;

second generation PRS currently second generation PRS currently being finalisedbeing finalised EDPRS will offer clear priorities with EDPRS will offer clear priorities with

which aid needs to be alignedwhich aid needs to be aligned Costing of EDPRS will give clear Costing of EDPRS will give clear

indication of resource gaps in the medium indication of resource gaps in the medium termterm

GoR Aid Policy (finalised July 2006) GoR Aid Policy (finalised July 2006) sets out clearly how aid should be sets out clearly how aid should be provided and managed, with a view to provided and managed, with a view to ensuring fit with the EDPRSensuring fit with the EDPRS Preferences in terms of aid modalities and Preferences in terms of aid modalities and

use of GoR systemsuse of GoR systems Provides a framework for GoR negotiation Provides a framework for GoR negotiation

and management of aidand management of aid

Institutional Institutional Capacities (II)Capacities (II) Important PFM reforms ongoing:Important PFM reforms ongoing:

New institutions created and strengthened New institutions created and strengthened (Auditor General, Ombudsman, National (Auditor General, Ombudsman, National Tender Board, Accountant General).Tender Board, Accountant General).

Organic Budget Law provides for improved Organic Budget Law provides for improved budgeting and execution.budgeting and execution.

Currently in process of preparing GoR Currently in process of preparing GoR consolidated accounts.consolidated accounts.

PFM Action Plan in place to strengthen PFM Action Plan in place to strengthen institutions and systems.institutions and systems.

Continued strengthening of sector Continued strengthening of sector planning and MTEFsplanning and MTEFs

SWAp introduced in Education sector and SWAp introduced in Education sector and soon to start in the health sectorsoon to start in the health sector

Administrative reforms that led to greater Administrative reforms that led to greater decentralisation – performance contracts decentralisation – performance contracts (Imihigo)(Imihigo)

Institutional Institutional Capacities (III)Capacities (III) New and strengthened GoR-donor New and strengthened GoR-donor

structures in place to manage and structures in place to manage and coordinate aid:coordinate aid: A dedicated External Finance Unit within A dedicated External Finance Unit within

the Ministry of Finance and Economic the Ministry of Finance and Economic Planning.Planning.

Development Partners Coordination Group Development Partners Coordination Group as a high-level forum for GoR-donor as a high-level forum for GoR-donor dialogue.dialogue.

Budget Support Harmonisation Group Budget Support Harmonisation Group provides a single forum for dialogue with provides a single forum for dialogue with Budget Support donors.Budget Support donors.

Sector-level working groups gradually Sector-level working groups gradually assuming a greater role in the assuming a greater role in the coordination of assistance at sector level.coordination of assistance at sector level.

Institutional Institutional Capacities (IV)Capacities (IV) Some key challenges ahead:Some key challenges ahead:

Further improving sector-level Further improving sector-level planning and coordination.planning and coordination.

Strengthening of planning and Strengthening of planning and budgeting at the district level – budgeting at the district level – Linking district development Linking district development plans (DDPs) to EDPRS.plans (DDPs) to EDPRS.

Strengthening monitoring and Strengthening monitoring and evaluation mechanisms.evaluation mechanisms.

Aligning donors to government Aligning donors to government systems systems

Human CapacitiesHuman Capacities Ongoing civil service reforms are Ongoing civil service reforms are

providing institutions with stability and providing institutions with stability and the human resources necessary to the human resources necessary to manage aid:manage aid: Improved salaries and conditions.Improved salaries and conditions. Introduction of performance contracts.Introduction of performance contracts.

Skills remain in short supply, but capacity Skills remain in short supply, but capacity building initiatives are in place (Human building initiatives are in place (Human Resource and Institutional Development Resource and Institutional Development Agency coordinates it):Agency coordinates it): The challenge now is to ensure that all TAs are The challenge now is to ensure that all TAs are

aligned with GoR priorities, and executed in a aligned with GoR priorities, and executed in a manner that leads to a sustainable impact on manner that leads to a sustainable impact on skills within government.skills within government.

Intensive training of professionals:Intensive training of professionals: E.g. ongoing training of public accountants, E.g. ongoing training of public accountants,

procurement officers, planners and othersprocurement officers, planners and others

Economic / Structural Economic / Structural CapacitiesCapacities To what extent can Rwanda’s economy To what extent can Rwanda’s economy

absorb additional aid?absorb additional aid? No evidence of “Dutch disease” effects on No evidence of “Dutch disease” effects on

exports through real exchange rate exports through real exchange rate appreciation.appreciation.

Efficient provision of aid plays an Efficient provision of aid plays an important roleimportant role Disbursements need to be predictable (cash Disbursements need to be predictable (cash

plan).plan). Aid needs to be channelled in a way that Aid needs to be channelled in a way that

strengthens absorptive capacity.strengthens absorptive capacity. Sectoral allocations (overcrowding in social sectors)Sectoral allocations (overcrowding in social sectors) Use national systems (procurement, reporting, etc… Use national systems (procurement, reporting, etc…

) )

What about capacities What about capacities ononthe part of donors and the part of donors and other stakeholders?other stakeholders?

In-country Donor In-country Donor CapacitiesCapacities Donor cooperation offices in Rwanda Donor cooperation offices in Rwanda

are often small in terms of staffing:are often small in terms of staffing: Unable to engage fully in policy dialogue Unable to engage fully in policy dialogue

that becomes increasingly important with that becomes increasingly important with the move towards partnership-based the move towards partnership-based modalities (e.g. budget support).modalities (e.g. budget support).

Many donor field offices are overly Many donor field offices are overly constrained by HQ-level regulations, constrained by HQ-level regulations, despite the commitments made at despite the commitments made at international level (e.g. Paris international level (e.g. Paris Declaration on Aid Effectiveness):Declaration on Aid Effectiveness): Cannot always align to the maximum Cannot always align to the maximum

extent, or enter into partnerships with extent, or enter into partnerships with other donors to increase aid effectiveness.other donors to increase aid effectiveness.

Limitations on aid modalities.Limitations on aid modalities. Always seeking non objections from Always seeking non objections from

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Civil Society Capacity Civil Society Capacity IssuesIssues Grassroots efforts in the elaboration of Grassroots efforts in the elaboration of

the EDPRS mean that the strategy is the EDPRS mean that the strategy is “owned” by its beneficiaries, but:“owned” by its beneficiaries, but: Literacy and skills remain a challenge to Literacy and skills remain a challenge to

civil society in its role in asserting greater civil society in its role in asserting greater ownership over development activities, and ownership over development activities, and in advocating for an effective use of aid.in advocating for an effective use of aid.

Relatively disorganised NGO sector Relatively disorganised NGO sector reduces ability to implement their reduces ability to implement their interventions effectively, though new interventions effectively, though new umbrella organisations (e.g. NGO platform) umbrella organisations (e.g. NGO platform) promise to improve this.promise to improve this.

The role of GoR and development The role of GoR and development partners in building and facilitating partners in building and facilitating capacity at grassroots level remains capacity at grassroots level remains important.important.

Why is scaling up of Why is scaling up of aid necessary in aid necessary in Rwanda?Rwanda?

Importance of Scaling Importance of Scaling Up (I)Up (I) Meeting the MDGs will require increased Meeting the MDGs will require increased

investment in social as well as productive investment in social as well as productive sectors, e.g.; education, health, water and sectors, e.g.; education, health, water and sanitation, agriculture, infrastructure etc..sanitation, agriculture, infrastructure etc..

Significant investment in productive sectors Significant investment in productive sectors needed to achieve sustainable growth, and needed to achieve sustainable growth, and reduce aid dependency in long term, e.g:reduce aid dependency in long term, e.g: Rural roads are still poor, hindering access to Rural roads are still poor, hindering access to

markets.markets. Electricity is in short supply, and expensive ($0.22 Electricity is in short supply, and expensive ($0.22

per KwH – over three times the price of per KwH – over three times the price of neighbouring countries).neighbouring countries).

The banking sector remains shallow, and savings The banking sector remains shallow, and savings rate is low: access to finance is crucial to private rate is low: access to finance is crucial to private sector development.sector development.

Agricultural transformation is another key area that Agricultural transformation is another key area that will ensure quick poverty reduction and sustained will ensure quick poverty reduction and sustained developmentdevelopment

The EDPRS will address these constraints, but The EDPRS will address these constraints, but there is need additional external resources.there is need additional external resources.

ConclusionsConclusions Rwanda has made significant progress in Rwanda has made significant progress in

rebuilding its institutionsrebuilding its institutions in a way that in a way that prepares it for a much-needed scaling up and prepares it for a much-needed scaling up and effective use of aid.effective use of aid.

Remaining constraints on the GoR side Remaining constraints on the GoR side should be examined alongside bottlenecks should be examined alongside bottlenecks and challenges identified on the side of and challenges identified on the side of development partners:development partners: they too need to change they too need to change the way they do business.the way they do business.

Use of country systems (budget execution, Use of country systems (budget execution, accounting, procurement) by donors is a pre-accounting, procurement) by donors is a pre-requisite to their continued strengthening.requisite to their continued strengthening.

Aid volume and effectiveness should be seen Aid volume and effectiveness should be seen as interlinked:as interlinked: as transaction costs are reduced, as transaction costs are reduced, the ability of a recipient government to manage a the ability of a recipient government to manage a greater volume of resources is improved.greater volume of resources is improved.

The capacity of an economy to absorb more aid The capacity of an economy to absorb more aid will also depend on how aid is allocated to will also depend on how aid is allocated to different sectors _ need to change the narrow different sectors _ need to change the narrow definition of pro poor spendingdefinition of pro poor spending

I THANK YOUI THANK YOU