Monetary policy

During the first half of 2002, inflation remained subdued and below the 3% target. However, due to rising prices of petroleum products on world markets, the increase in VAT, a dry season that increased prices of locally produced goods and an accelerating Rwandan Franc depreciation, inflation reached 6.2% by the end of the year.

Excessive growth in the money supply is considered as one of the major causes of inflation. Broad money grew by 12.4%, 5.5% higher than targeted. In 2002, shortfalls in expected foreign assistance, in the first half of the year, pushed the Government to rely on credit from the banking sector. This, together with weak exports performance led to an important depreciation of the Rwandan franc in the second half of the year and rising interest rates in the monetary market as the central bank acted to tighten liquidity conditions during the last quarter. Credit to the economy grew by 14.3%, one percent above target.

For 2003, average inflation is projected at 4.7%, well above the 3% target. Figures at the end of April show that consumption prices have risen by 2.6%, which means that if, as expected, prices continue to rise, even the 4.7% projection will not be met. Consequently, together with strong economic performance, it will be very difficult to attain the target set for the money supply growth.

Financing the poor remains a challenge to the Rwandan banking system. Agriculture only attracted 2% of bank credit in 2002, despite the existence of the Union des Banques Populaires du Rwanda (UBPR), which was created precisely to inject capital into the rural areas. An important reason for low take–up is that domestic savings are virtually non–existent, partly due to the central role of a non–monetised informal sector in rural areas. However, some progress was made in 2002–2003. The Common Development Fund (CDF) continues to aim at improving resource co–ordination at the decentralised level, the NBR has put in place a legal and regulatory framework for micro–finance and PI–HIMO, the labour intensive public works programme (see Box 2), intends to contribute to recapitalisation of the rural economy.

Fiscal Policy

Fiscal policy is an important aspect of macroeconomic stability. Annex 3 gives a comprehensive overview of Rwanda’s fiscal policy for 2001–2004. The 2002 domestic fiscal deficit was kept within the limits agreed under the PRGF program except for exceptional outlays related to troop withdrawal from the DRC. The deficit before grants was placed at 11.0% ² of GDP compared to 9.5% in 2001. The target for 2003 is 11.3%. The overall fiscal deficit was financed in a non–inflationary as it was more than covered by external grants and loans. Overall grants amounted to RwF 71 million, whilst total net loan disbursements amounting to RwF 32 billion.

A recurrent problem is the delay in the disbursement of external funds. In 2002, this was largely due to protracted negotiations between Rwanda and the IMF over the new PRGF agreement and postponement of the World Bank’s IRC and the EU budget support.

Domestically, the tax base, while still small, continues to be strengthened. Tax Revenue collection was stronger than expected. Domestic revenue increased to 12.2% of GDP in 2002 up from 11.4% of GDP in 2001. The increase was mainly due to raising the VAT rate from 15% to 18% and improved collection on income taxes, despite the reduction in corporate income tax from 40% to 35%. Various revenue–enhancing measures were taken with adoption of the 2003 Budget (see Box 1 below) and domestic fiscal revenue is projected to increase to 13.4 percent of GDP in 2003. Turnover declared at Rwanda Revenue Authority (RRA) for VAT filing increased by 15% during the first quarter of 2003 over the corresponding period of 2002.

As Figure 1 shows, the composition of expenditure is increasingly towards PRSP priority programmes ³ (for an overview see Annex 4A), whilst the decrease in military expenditure reflects the impact of demobilisation programmes and troop withdrawal from the DRC. Exceptional expenditure, that spending specifically related to Rwanda’s need to deal with its unique post–conflict situation (for an overview see Annex 5), peaks in 2003 due to constitution, elections and gacaca related activities, and is then projected to decline in 2004 and 2005.

Recurrent Spending as % of GDP

Citation: IMF Staff Country Reports 2004, 273; 10.5089/9781451833300.002.A001

Source: Ministry of Finance Flash Reports 1998–2001, Finance Law 2002–2003, PEMR.

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Recurrent Spending as % of GDP

Citation: IMF Staff Country Reports 2004, 273; 10.5089/9781451833300.002.A001

Source: Ministry of Finance Flash Reports 1998–2001, Finance Law 2002–2003, PEMR.

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Recurrent Spending as % of GDP

Citation: IMF Staff Country Reports 2004, 273; 10.5089/9781451833300.002.A001

Source: Ministry of Finance Flash Reports 1998–2001, Finance Law 2002–2003, PEMR.

• Download Figure
• Download figure as PowerPoint slide

The discussion on the optimal fiscal deficit, critical for a post–conflict country like Rwanda, is ongoing with the International Financial Institutions. In this regard, the PSIA (Poverty and Social Impact Analysis) presents a convincing case for increased frontloading of essential public expenditure (see Annex 2) The Government of Rwanda strongly believes that current public expenditure levels must be increased in order to set a sustainable base for poverty reduction and social stability and to deliver its commitments to Rwandan citizens. Activities most strongly related to this aim such as the HIMO labour intensive public works programme (see Chapter 3, Box 2) the mutuelles health insurance scheme and rural electrification will be given priority as additional funding becomes available. It has to be acknowledged, however, that absorption capacity is still very low; as such, the target growth for foreign–financed capital expenditure was set at 6.5%. However, one of the key underlying issues regarding absorption is a lack of coherency and co–ordination between development projects and Government priorities. Progress in this area is reported later in the report.

Trade and investment

The continued decline in international prices for tea and especially coffee and coltan, has increased the vulnerability of Rwanda’s balance of payments. The 2% decline in imports, mainly due to an 11% decline in food imports related to exceptionally good harvests in 2002, did not cover the 28% decrease in exports. As such, the external current deficit increased from 15.9 percent of GDP in 2001 to 17.2 percent in 2002. This has led to a strong decline in Rwanda’s terms of trade. Encouraging is the growth in non–traditional exports such as pyrethrum, hides and skins, cement and UTEXRWA products ⁴.

In 2002, coverage of exports by imports was only 36%. Foreign savings more than fully covered this deficit, allowing the BNR to increase its gross international reserves from the equivalent of 5.8 months of imports in 2001 to 6.3 months in 2002. The target for 2003 is 7.4 months. The deficit on the external current account is expected to rise to 18.7% of GDP in 2003. This projection largely stems from an increase in imports, related to petroleum for strategic reserves and service payments linked to an increase in external assistance. A modest improvement in international prices and a robust growth of coffee and tea export volumes is expected.

In the medium term, the high level of external account deficit will remain a concern. In light of this, a substantial effort is being devoted to expanding and diversifying the export base, including through greater concentration on the specialty coffee market, privatisation of tea estates, the intensified use of fertilizer to increase yields in the production of export crops, and through the replenishment of Rwanda’s ageing tree stocks.

Meanwhile, government has continued to promote economic openness as an incentive to economic growth. With a view of joining COMESA in January 2004, Rwanda has started to reduce interborder tariffs. Further, Rwanda will be able to benefit from the AGOA agreement that aims at enhancing trade and investment between the U.S. and Sub–Saharan Africa. The areas of focus in Rwanda are those in textiles and handcrafts.

As mentioned, domestic savings and investment are very weak. However, a significant increase in domestic savings will be required to finance the necessary increase in domestic investment to redress macroeconomic imbalances. In the medium run, ODA inflows should gradually be reduced to make place for an increased inflow of foreign investment. This is expected to be enhanced by the prospects of a return to stability in the Great Lakes Region and the continued implementation of prudent macroeconomic policies.

Progress made in public expenditure management in 2002

The Ministerial budget submissions for the MTEF 2002–2005 were accompanied by Strategic Issues Papers, in which ministries explicitly linked their strategic planning choices to their budget submission. In addition, the papers addressed linkages between ministerial and sector wide activities.

The accuracy of preliminary budget ceilings noticeably improved, as budget discipline increased amongst ministries and provinces. Budget committees were established as a way of preserving continuity in budget preparation and addressing the high turnover in government staff.

Progress was made in the Budgetary Classification system (by sector; programme and subprogramme; economic item) as it was replicated at Central, Province and District level. Importantly, Government has launched a process of gender budgeting in five pilot ministries and this is due to roll–out to provinces.

Fiscal decentralisation

Fiscal decentralisation is ongoing. From 2002 onwards, provinces were given independent budgets, and districts will receive 1.5% of last year’s domestic revenue for recurrent expenditure. The CDF will eventually channel 10% of last year’s domestic revenue to districts for development purposes. The CDF was given legal status and has produced a procedures manual. The reporting system of financial operations of the districts is being devised and detailed breakdowns of CDF expenditure will subsequently accompany the national budget. New taxes were introduced to be collected and used at the district level, devolving real responsibility from the centre; districts now collect property tax, licensing fees and tax on rent.

At the provincial level, ministries have identified specific activities to be decentralised to Province offices and the transfer of finances and staff will proceed throughout 2003–2004. In the 2003 budget, provinces received a relative rise in their share of the recurrent budget, whilst this trend is forecast to continue in the MTEF’s preliminary ceilings for 2004–2006 ⁵.

Table 2.1:

Fiscal Decentralisation Through the Recurrent Budget and the CDF

^*1,5% of last year’s domestic revenue

^**gradually moving towards 10% of last year’s domestic revenue

Table 2.1:

Fiscal Decentralisation Through the Recurrent Budget and the CDF

		2001 (revised)	2002 (revised)	2003	2004 (prelim.)
Total Budget of Rwandan Ministries		96,8	96,60	117,5	100,5
Total Budget of Rwandan Provinces			22,00	25,60	26,60
Total Budget of Rwandan Districts			3,37	5,53	7,27
	recurrent*		1,37	1,53	1,77
	CDF**		2,00	4,00	5,50

^*1,5% of last year’s domestic revenue

^**gradually moving towards 10% of last year’s domestic revenue

View Table

Table 2.1:

Fiscal Decentralisation Through the Recurrent Budget and the CDF

		2001 (revised)	2002 (revised)	2003	2004 (prelim.)
Total Budget of Rwandan Ministries		96,8	96,60	117,5	100,5
Total Budget of Rwandan Provinces			22,00	25,60	26,60
Total Budget of Rwandan Districts			3,37	5,53	7,27
	recurrent*		1,37	1,53	1,77
	CDF**		2,00	4,00	5,50

^*1,5% of last year’s domestic revenue

^**gradually moving towards 10% of last year’s domestic revenue

Challenges: development budget and budget monitoring

One of the major problems in both budget preparation and execution is the integration of the development budget with the recurrent budget. Integration, meaning that decisions on spending priorities and sector strategies can be made on full sector wide information is a necessary part of effectively implementing the PRS. To date, better integration has been impeded by the intensive restructuring of CEPEX, problems in reconciling the different classification methods in the two budgets and the nature of donor projects that, in some cases, operate completely outside of national systems.

Whilst budget preparation procedures, seem robust and well recognised, in particular for the recurrent budget, throughout government agencies, budget execution has yet to reach an equivalent standard, especially in regard to output monitoring.

In 2002 most recurrent budget expenditure on inputs was captured in the SIBET (Système Informatique du Budget de l’Etat) database (see Annex 4A). The 2003 budget will widen coverage of the previously off–budget revenue by including receipts from the semiautonomous agencies. However, there is still very little detailed information on the execution of the development budget.

To strengthen monitoring outputs, a Joint Monitoring System was set up to monitor the outputs specified in each ministry/province MTEF. However, the problem of predictability of the funds available to Government makes it very difficult for ministries to adhere to this system. In this respect, the cash budget, whilst succeeding in maintaining arrears within reasonable limits, also acts to prevent smoothing out of this unpredictability.

Despite this, Government believes that the cash budget can and should do more in reducing uncertainty regarding the flow of funds from the centre to line ministries. In order to protect spending on long–term strategic considerations, government plans to issue clear guidelines on how monthly cash releases are to be determined. In addition, cash plans will be linked more explicitly with the Finance Law and better participation and communication with line ministries in preparing and implementing these cash plans will be promoted. The recent revival of the Cash Budget Committee within MINECOFIN is a first step towards this.

Budget execution: priority programmes

Within the framework of priority programmes (for an overview of priority programmes, see Annex 4), criteria for prioritisation (see Annex 1). are currently being revisited to make them more concrete and user friendly for government agencies.

Figures in Annex 4 on the recurrent budget, taken from SIBET, show that for priority programmes, budget execution reached 102%, whilst attaining 106% for programmes that fall outside PSR priorities. This is not immediately worrying, as non–priority programmes often contain the running costs for the priority programmes, which are likely to suffer less from implementation and absorption capacity problems. However, some key PRSP ministries such as MINAGRI, MINEDUC and MINISANTE did succeed in performing better on their priority programmes.

It has to be noted that these aggregate figures hide the fact that most ministries did not reach the spending level aimed for in the Finance Law (the sector chapter gives more details on budget execution).

More importantly, these figures do not highlight the timing of disbursement. This was the main problem in the execution of the budget. Some government agencies did not receive any funds in the first quarter. Budget support from the World Bank and the EU did not arrive until September.

One of the PRGF criteria is to increase priority spending with 0.1% of GDP. This target was met for both 2001 and 2002 and is envisaged to grow to 6.2% in 2003. Priority programmes have so far been successfully protected from in–year budget cuts, especially during the budget revision.

Whilst this mechanism shows commitment to these programmes, it does not allow for much flexibility. Indeed, spending on non–PRSP–priority programmes, by definition decreases, whilst they are often needed to keep the priority programmes running. These observations might well call for rethinking the priority programme system as it is currently carried out for next year’s budget preparation within the framework of the revision of the full PRSP.

CEPEX has started to ensure that projects are planned within priority programs defined in the sector planning process, as their execution is currently not parallel to existing programme implementation. Progress in the sectoral planning process will further strengthen government capacity to prioritise and to improve resource allocation.

Institutional and legal framework

In 2002, the Government of Rwanda continued to stress actively accountability and transparency. Following recommendations of a study on government bank accounts completed in 2002, information was included in the 2003 budget to ensure that budget submissions include more detail on the sources and uses of government funds. New guidelines for opening, closing and monitoring government bank accounts were issued in 2002. The office of the Auditor General completed audits of 2001 accounts of 34 public sector entities including 10 ministries along with 13 projects in 2002. The “cours des comptes” will be brought into this agency, expanding it substantially. The Inspector General of Finance continues to do internal auditing work within MINECOFIN and many government ministries have their own internal auditors. The National Tender Board continues to handle government transaction and was given a legal status by the Prime Minister Decree of 30^th October 2003. The Office of the Ombudsman will monitor corruption and social injustices.

Meanwhile the Organic Budget Law has been drafted and will complement the Financial Law to provide a legal framework for the accountability of State funds. Government is studying means of improving government accounting and financial reporting in addition to the existing SIBET system. An effective use of the Financial Management and Accounting Procedures Manual for Local Governments will ensure accountability in fiscal decentralisation and use of CDF money.

In general, issues to do with financial management, of which the most important ones are mentioned above, are being addressed within the integrated and coherent framework of the Financial Accountability Review and Action Plan (FARAP).

Sector strategies and clusters

Sector Strategies, the aim of which is to capture all spending in one sector and define a coherent, poverty–focused strategy together with all partners in the sector, is the principal tool for implementing the PRSP.

Progress in development of sector strategies has been slower than planned due to constraints in human and financial resources and some inertia within the government system to this new approach, but some sectors, educationand the HIV/AIDS cluster have made significant progress. To guide progress, the MINECOFIN has produced guidelines that enable government agencies to develop sector strategies by December 2003.

Thematic clusters between government agencies and ministries were recently formed to promote co–ordination and coherence. The cluster composition can be found in Table 4, adapted from Table 5.1. In the PRSP. A recent development is the sub-division of some clusters, for example education and health, in order to advance progress.

Table 2.2:

Composition of Clusters

Table 2.2:

Composition of Clusters

Cluster	Governmental Members Institutions	Facilitating Ministry	Donor
1. Agriculture, rural development, land and environment	MINAGRI, MINITERRE, MININFRA, MINALOC, MIGEPROFE	MINAGRI	World Bank
2. Infrastructure and ICT	MININFRA, MINICOM, MINITERE, MIGEPROFE	MININFRA	European Union
3. Social Sector	MINEDUC, MINISANTE, MIGEPROFE, MIJESPOC, MINALOC, MININFRA, MIFOTRA	MINEDUC	DfID
4. Human Resources and Capacity Building	MIFOTRA, MINEDUC, MINALOC, MIGEPROFE	MIFOTRA	SIDA (Sweden)
5. Private Sector, Industry	MINICOM, MINAGRI, MININFRA, MIGEPROFE	MINICOM	USAID
6. Governance	MINALOC, MININTER, MIGEPROFE. MINIJUST, MINAFFET, MINADEF, MIGEPROFE, CNURC, CNDH, CNE, C.CONSTITUTIONNELLE	MINALOC	UNDP
7. CDF/Decentralisation	MINALOC, MIFOTRA, MINITERE, MINAGRI, MININFRA, MIGEPROFE	MINALOC	The Netherlands
8. HIV/AIDS	MINISANTE, MINEDUC, CNLS, MIJESPOC, MINALOC, MIGEPROFE, MINADEF	MINISANTE	USAID

View Table

Table 2.2:

Composition of Clusters

Cluster	Governmental Members Institutions	Facilitating Ministry	Donor
1. Agriculture, rural development, land and environment	MINAGRI, MINITERRE, MININFRA, MINALOC, MIGEPROFE	MINAGRI	World Bank
2. Infrastructure and ICT	MININFRA, MINICOM, MINITERE, MIGEPROFE	MININFRA	European Union
3. Social Sector	MINEDUC, MINISANTE, MIGEPROFE, MIJESPOC, MINALOC, MININFRA, MIFOTRA	MINEDUC	DfID
4. Human Resources and Capacity Building	MIFOTRA, MINEDUC, MINALOC, MIGEPROFE	MIFOTRA	SIDA (Sweden)
5. Private Sector, Industry	MINICOM, MINAGRI, MININFRA, MIGEPROFE	MINICOM	USAID
6. Governance	MINALOC, MININTER, MIGEPROFE. MINIJUST, MINAFFET, MINADEF, MIGEPROFE, CNURC, CNDH, CNE, C.CONSTITUTIONNELLE	MINALOC	UNDP
7. CDF/Decentralisation	MINALOC, MIFOTRA, MINITERE, MINAGRI, MININFRA, MIGEPROFE	MINALOC	The Netherlands
8. HIV/AIDS	MINISANTE, MINEDUC, CNLS, MIJESPOC, MINALOC, MIGEPROFE, MINADEF	MINISANTE	USAID

a. Policy issues and strategy

Rwanda’s Vision 2020 sets a goal of reducing the population working in agriculture from 90% to 50% in two decades and transform the subsistence economy into a market-based economy. The PRSP objective by 2015 is to raise out of poverty half of the population living below the poverty line. For these objectives to be achieved the poverty reduction strategy focuses on the intensification, diversification and transformation of the agricultural sector.

The development of agriculture poses a great challenge to policy makers. Agriculture is mainly subsistence, characterised by smallholdings and low soil productivity due to over cultivation and low use of modern inputs. Increased agricultural production is geared to attaining food self–sufficiency, and increasing rural incomes.

Currently growth in agricultural production is at the mercy of good weather. The challenge ahead is the introduction of technology–based production to sustain high growth rate in the sector and to improve the management of natural resources. The strategy has been to protect hills and marshlands as it has been established that lack of soil protection on hillsides has had negative effects to reclaimed marshlands.

The fertiliser market has been liberalized and efforts to promote seasonal credit were put in place. However, the access and use of fertiliser is still low for the majority of farmers. The emphasis has been the creation and strengthening of associations and cooperatives as channels for marketing and extension services. The legal framework for participation of the private sector in seed multiplication and distribution was defined in 2002.

Livestock development policy in agriculture is centred on four elements. These are to ensure increased supply of animal feed, provide veterinary services, restocking and improving the quality of animal breeds. Rwanda has witnessed alarming rates of deforestation due mainly to movement of people and of livestock. The household demand on wood is substantial and the rate of reforestation has been relatively low.

b. Priority programmes

The performance of priority programmes in this section is assessed according to two important aspects. These are the level of adherence to the policy orientation described above and the possible outcome with regard to poverty reduction. The distribution of agriculture growth across provinces and income groups will be viewed.

Agricultural production

Agricultural production performances can be evaluated by analysing past trends in production and in particular the change in output between 2001 and 2002 for priority crops as can be seen in Table 5.

Table 3.1:

Trends of Production of Priority Crops

Source: MINAGRI

Table 3.1:

Trends of Production of Priority Crops

Crop	Rice	Maize	Soya	Potatoes	Beans	Coffee (tonnes)	Dried Tea (tonnes)
1995	2,001	55,600	0	137,700	126,300	21,952	5,414
1996	6,596	66,595	0	195,381	178,697	15,285	9,057
1997	9,805	83,427	4,279	229,625	141,815	14,830	13,239
1998	7,935	58,618	9,831	181,138	153,917	14,268	14,874
1999	8,921	54,912	4,707	175,889	140,425	18,817	12,669
2000	11,363	62,502	7,034	954,418	215,347	16,098	14,481
2001	17,697	92,129	17,140	988,982	289,983	18,268	17,817
2002	24,539	78,465	19,216	1,097,503	244,623	-	-

Source: MINAGRI

View Table

Table 3.1:

Trends of Production of Priority Crops

Crop	Rice	Maize	Soya	Potatoes	Beans	Coffee (tonnes)	Dried Tea (tonnes)
1995	2,001	55,600	0	137,700	126,300	21,952	5,414
1996	6,596	66,595	0	195,381	178,697	15,285	9,057
1997	9,805	83,427	4,279	229,625	141,815	14,830	13,239
1998	7,935	58,618	9,831	181,138	153,917	14,268	14,874
1999	8,921	54,912	4,707	175,889	140,425	18,817	12,669
2000	11,363	62,502	7,034	954,418	215,347	16,098	14,481
2001	17,697	92,129	17,140	988,982	289,983	18,268	17,817
2002	24,539	78,465	19,216	1,097,503	244,623	-	-

Source: MINAGRI

It can be seen that with the exception of maize and beans, priority crops registered positive change between 2001 and 2002. The long-term trend for all the crops since 1995 generally remains upwards.

It is important to note that in future monitoring input use and relative productivities is necessary for priority crops. Meanwhile market prices for the priority crops are noted to have fluctuated over time and across–regions. Noteworthy also is that two of the priority crops namely potatoes and beans are among the top three commodities consumed by the poor as evidenced by the Rwanda poverty profile.

To promote professional seed multiplication a law on seed multiplication, inspection and marketing has been voted by Parliament. A 500 tonnes seed storage facility and a seedcleaning unit have been constructed in 2002. Of 1,600 tonnes produced for the purpose in 2002, some 1,200 tonnes were distributed to farmers. Seed multiplication was used all over the country by mostly by farmers’ associations. Administrative arrangements have been put in place to carry out seed quality inspection on a regular basis.

The volume of fertiliser imports doubled in 2002. MINAGRI has put in place a line of credit with NBR in order to facilitate traders to import chemical fertilisers. In 2002, the government made available funds amounting to RwF 123,983,131 with the Banques Populaires for micro financing for seasonal loans.

In 2002 training to farmers in use of modern inputs was continued. Government through MINAGRI has introduced guarantee funds and subsidised repayment schemes on agribusiness using financial support from World Bank and USAID. Adaptive research has been developed for priority crops. ISAR the centre charged with agricultural research is being restructured.

For coffee, emphasis was put in investing in high quality crops and construction of washing stations. In 2001, the production of fully washed coffee was 50 tonnes and it fell to 32 tonnes in 2002. It is expected that the more effective organisation of producers associations, greater participation of the private sector and replacement of old coffee trees will increase the coffee output in the near future.

In the tea sector, the Mulindi and Pfunda tea estates will be privatised in 2003: 55% of shares will go to a strategic investor, while the other shares will remain within the country. Of this remaining 45%, 10% will be owned by farmers’ associations/co–operatives. Further, the government has sold 13.45% of its shares in the private tea estate Sorwathe, while a remaining 23% will be sold to a farmers’ association. The quality of tea leaves and the application of fertiliser have deteriorated following the reduced intervention by OCIR–Thé. Other identified constraints are under capacity and the ageing machinery in processing plants. Furthermore, recent data show that about 800 ha of plantations are old and 500 ha in Mulindi have been destroyed by bad drainage. Privatisation is expected to increase efficiency in the sector and to provide solutions to these problems.

One of the big challenges of the sector will be the gradual transformation of OCIR–Thé from intervening in areas such as subsidising and investing towards a more supporting and regulating agency, without jeopardising the viability of the plants. Production in 2001 was 18000 tonnes and is targeted to reach 35000 in 2010.

Achievements under agricultural production

• - Remarkable increase in output for majority of crops and exports

• - Efforts to promote select seed multiplication started

Challenges

• - Developing a sustainable export crop strategy- traditional and non-traditional crops

• - Use of fertiliser is crucial to increased productivity

3.2.1. Education

b. Priority programmes

Primary and pre–primary education

The level of development of pre–primary education is still limited. The first Joint Review has endorsed that pre–school education must be expanded and given priority, especially in the rural areas. In 2002, the number of pupils was a mere 18,399. Two studies aimed to provide detailed information on this education level were carried out in 2002 in collaboration with UNICEF and the World Bank.

Primary education has exhibited some considerable progress as can be noted from (Table 3.2). The gross enrolment rate is now almost 100%. However, the good achievements have been dampened by relatively high drop out rates of up to 16.6%. In 2002, the net enrolment rate rose to 74.5% (from 73.3% in 2001). In 2003, the rate has gone up to 82%, which compares favourably with the 76% projection. This figure is expected to rise further due to the abolition of the RwF 300 annual school fee from September 2003 onwards. Whilst the government will subsidise schools for that amount, there will still be the issue of an initial worsening of the teacher/pupil ratio, which will need to be addressed. The trade off between teaching quality and broad access will be the main challenge.

Table 3.2:

Major Changes in Primary Education

Source: Monitoring Education Performance in Poverty Reduction in Rwanda, MINEDUC.

Table 3.2:

Major Changes in Primary Education

Indicator	2001	2002	2003 Prel.
Number of boys (%)	50.0	49.8	49.5
Number of girls (%)	50.0	50.2	50.5
Gross Enrolment Rate (%)	99.9	103.7	108.9
Gross Enrolment Boys (%)	101.9	105.8	109.9
Gross Enrolment Girls (%)8	98.2	102.3	108.0
Net Enrolment (%)	73.3	74.5	81.7
Net Enrolment boys (%)	72.9	74	80.9
Net enrolment girls (%)	74.9	74.9	82.3
Transition to secondary	-	37	40
Promotion rate (%)	54.0	66.2	-
Repetition rate (%)	31.8	17.2	-
Drop out rate	14.2	16.6	-
Teachers (nos.)	28,698	26,024	-
Teachers-male (nos.)	14,034 (48.9%)	12,975 (49.9%)	13,450
Teachers-female (nos.)	14,664 (51.1)	13,049 (50.1)	13,562
No of qualified teachers	17,995 (62.7)	21,123 (81.2)	22,997
Students/teacher ratio	51.0	58.9	59.9
Students/qualified teacher ratio	82	72.6	70.3
No. of schools	2,142	2,172	2,177
No. of classrooms	27,339	27,735	28,503

Source: Monitoring Education Performance in Poverty Reduction in Rwanda, MINEDUC.

View Table

Table 3.2:

Major Changes in Primary Education

Indicator	2001	2002	2003 Prel.
Number of boys (%)	50.0	49.8	49.5
Number of girls (%)	50.0	50.2	50.5
Gross Enrolment Rate (%)	99.9	103.7	108.9
Gross Enrolment Boys (%)	101.9	105.8	109.9
Gross Enrolment Girls (%)8	98.2	102.3	108.0
Net Enrolment (%)	73.3	74.5	81.7
Net Enrolment boys (%)	72.9	74	80.9
Net enrolment girls (%)	74.9	74.9	82.3
Transition to secondary	-	37	40
Promotion rate (%)	54.0	66.2	-
Repetition rate (%)	31.8	17.2	-
Drop out rate	14.2	16.6	-
Teachers (nos.)	28,698	26,024	-
Teachers-male (nos.)	14,034 (48.9%)	12,975 (49.9%)	13,450
Teachers-female (nos.)	14,664 (51.1)	13,049 (50.1)	13,562
No of qualified teachers	17,995 (62.7)	21,123 (81.2)	22,997
Students/teacher ratio	51.0	58.9	59.9
Students/qualified teacher ratio	82	72.6	70.3
No. of schools	2,142	2,172	2,177
No. of classrooms	27,339	27,735	28,503

Source: Monitoring Education Performance in Poverty Reduction in Rwanda, MINEDUC.

Expanding teacher training and raising the supply of textbooks are priorities in primary education. In 2002, there were 2,217 pre service students in Teacher Training Colleges (TCC’s) and 1,013 in KIE and NUR. New teacher and pupil books have been distributed, especially in P4 and P6 ⁹, but given the dire needs of textbooks in Rwanda this was a modest action compared to the target of one book for at least three pupils. This aim is certainly an important one that will have to be monitored in the future.

A large part of funds reaching the primary education level is spent on salaries. As such, government’s focus on access, quality and efficiency is jeopardised by resource constraints. This situation needs to be addressed, especially in the light of the planned extension of basic education to 9 years.

Achievements

• - EFA plan development is in final stage

• - Net enrolment rate has increased and is expected to increase more with the abolition of annual fees

• - Number of textbooks per pupil has risen

Challenges

• - Expected increase in pupils and the subsequent need for more teachers needs to be balanced with non-wage costs

• - The target on number of textbooks per pupil still have to be met

• - Drop out rate and repetition rate are still very high

Secondary education

Secondary education is still relatively underdeveloped and access is restricted for the poor as less than 5% of secondary schoolchildren are from the poorest 20% of households ¹⁰. A way to assist the more gifted pupils is being worked out through Community Development Committees. The transitional rate from primary to secondary school in 2002 was 37%, with very few of them studying sciences. To address this issue, each district has set up an education fund, with money from bursaries (managed by MINALOC beforehand) and FARG. Parents are encouraged to participate in this set up.

Distance learning is growing in importance, and in 2002 KIE received equipment to facilitate the programme. A programme for 350 teachers was started. For quality control, the Ministry emphasized inspections. In 2002, 189 secondary schools were inspected. Currently the plan is to train 7 inspectors in the O.K. and 126 locally.

Achievements

• - Considerable growth in teacher training and distance learning

• - Education funds have been set up in districts, proposal to support gifted students are underway

Challenges

• - Transition rate to secondary education is still low, especially for the poorest.

Tertiary education

Tertiary education will continue to be an important source of rare human resources in a post genocide situation. The transition from secondary to tertiary is still very low and access of pupils from poor households is limited. On the relative cost of tertiary education, public expenditure on non-pedagogical costs was reduced. Cost sharing schemes, such as student loans are being established and work is ongoing to find innovative financing ways. Promotion of private initiatives will be key in decreasing unit costs. As most higher learning institutes are only just being established, local staff need to be trained, especially in science. One solution to be explored is the hiring of expatriate staff on short-term contracts for training and lecturing.

Achievements

• - Reduction of average public expenditure on non-pedagogical costs

• - Cost sharing schemes are being established

Challenges

• - Staff need to be adequately trained, possibly through the hiring of expatriate lecturers

Science and technology in education

Research is reported by MINEDUC to be still underway to determine the relevance of technologies to the lives of the poor. Research need to be reoriented towards needs of the population.

Vocational training

This sub sector appears to be suffering from under-resourcing. Most vocational training centres also require rehabilitation although some rehabilitation work is reported in 2002. Another challenge is revisiting the content and form of skills provided with the view of matching them with demand in the labour market; a labour market survey addressing these issues will be carried out.

Popular education and functional adult literacy

In 2002, functional adult literacy was developed into a National Programme and primary school buildings will be used as centres of learning with NGOs being drawn in the programme through regular meetings. The ultimate task is to ensure adult functional literacy and young people education programme are linked to economic livelihood opportunities in a life long learning perspective.

HIV/AIDS education

HIV/AIDS education has been incorporated in programs such as in civics. Education and related material and teachers’ guides for primary and secondary schools on HIV/AIDS have been prepared. Anti–AIDS clubs were established in all secondary schools and higher learning institutions. In 2002, 84 teachers were trained in HIV/AIDS sensitisation.

Planning and financing

In 2002, MINEDUC developed a Sector Status analysis that has provided inputs to a Sector policy and Strategic plan for 2003–2008. A robust approach is ensured by the adoption of a Sector Wide Approach in Education (SWAp), including all partners in the sector to participate in the drafting and agreement of one integrated education strategic plan with a global monitoring framework where all partners agree on the indicators to be followed (see Table 3.2) and Chapter 4).

The First Joint Review of the Education Sector was held in early 2003. Some key recommendations in line with basic education include a reduction in the number of subjects taught and transforming schools into community learning and development centres. For nonformal education one of the major concerns is to improve functional literacy whereas at secondary level technical and vocational education were emphasised. The most important issues in tertiary education are cost sharing and gender parity. As regards teachers’ circumstances, a teacher supply and demand survey was thought to provide useful insights.

The education sector is a main priority both for the Government and for its partners. Of the total amount of priority spending, the education share has been consistently more than 50% (^{Table 3.3}). Even though in the envisaged 2003 budget the share of education in total recurrent and development spending is going down, in absolute figures it is still increasing. Absorption capacity as measured by recurrent budget execution has gone up since 1998, helped by well thought out training programmes.

Table 3.3:

Education expenditure

^*Figures for 2003 are not outturns

Source: Ministry of Finance and Economic Planning, Flash Reports 1998-2001

Table 3.3:

Education expenditure

	1998	1999	2000	2001	2002	2003*
%allocation in total recurrent expenditure	16,9	23,0	25,4	23,2	25,8
%allocation in total development expenditure	8,9	12,6	12,6	12,3	17,1	11,6
%share in priority programmes				62,6	51,7
%Recurrent budget execution	79,7	96,9	96,1	97,6	108
p.m. Total recurrent expenditure (RwF bio.)	75,3	86,5	89,3	107,4	129	149,7
p.m. Total Development expenditure (RwF bio.)	92,9	71,2	66,2	50	56,1	64,9

^*Figures for 2003 are not outturns

Source: Ministry of Finance and Economic Planning, Flash Reports 1998-2001

View Table

Table 3.3:

Education expenditure

	1998	1999	2000	2001	2002	2003*
%allocation in total recurrent expenditure	16,9	23,0	25,4	23,2	25,8
%allocation in total development expenditure	8,9	12,6	12,6	12,3	17,1	11,6
%share in priority programmes				62,6	51,7
%Recurrent budget execution	79,7	96,9	96,1	97,6	108
p.m. Total recurrent expenditure (RwF bio.)	75,3	86,5	89,3	107,4	129	149,7
p.m. Total Development expenditure (RwF bio.)	92,9	71,2	66,2	50	56,1	64,9

^*Figures for 2003 are not outturns

Source: Ministry of Finance and Economic Planning, Flash Reports 1998-2001

3.2.2. Health

a. Policy issues and strategy

The long-term objective of the health sector is to have a healthy population as a precondition for fully using Rwanda’s human resources in developing the country in a sustainable way. Specific goals for 2015 are reducing under-five mortality rate by 2/3 and maternal mortality rates by 3/4 and decreasing the fertility rate from 5.8 to 4. The incidence of the leading causes of mortality, namely malaria and AIDS, will be reduced by half in the same period. MINISANTE developed a health policy, in 2000, which is currently being reviewed. The Ministry is drafting its strategic plan using the Sector Wide Approach (SWAp) and benefits in the process from wide consultations with health sector partners. Situational analyses, coordinated by health district agents were carried out with extensive participation of health committees at the grassroots level. Policy directions derived from this process are implemented by the health district, which is the health system’s operational unit at the decentralised level.

^{Table 3.4}. gathers indicators of the health information system (covering public facilities only). In 2002, the rate of service utilisation improved marginally from 0.24 to 0.28 consultations per person per year ¹¹. Over the period there was also an increased usage of qualified personnel (although it remains low), and increased vaccination coverage.

Table 3.4:

Performance of the Health Sector

Source: Performance Monitoring of Health Sector Indicators for Poverty Reduction, 2003; p.30, MINISANTE.Note: HIS is Health Information System.

Table 3.4:

Performance of the Health Sector

Indicator	Evolution 2001	2002	2003 (targets)	Source
Rate of utilisation of health services	0.25	0.28	(0.30)	HIS Health Centre Annual
Rate of coverage of DTC-PO3 vaccination	77	85	(90)	HIS Health Centre Annual
Birth attended to qualified personnel (%)	32	35	(37)	HIS Health Centre Annual
Access to mutuelles (%)	15	20	25	HIS Health Centre Annual

Source: Performance Monitoring of Health Sector Indicators for Poverty Reduction, 2003; p.30, MINISANTE.Note: HIS is Health Information System.

View Table

Table 3.4:

Performance of the Health Sector

Indicator	Evolution 2001	2002	2003 (targets)	Source
Rate of utilisation of health services	0.25	0.28	(0.30)	HIS Health Centre Annual
Rate of coverage of DTC-PO3 vaccination	77	85	(90)	HIS Health Centre Annual
Birth attended to qualified personnel (%)	32	35	(37)	HIS Health Centre Annual
Access to mutuelles (%)	15	20	25	HIS Health Centre Annual

Source: Performance Monitoring of Health Sector Indicators for Poverty Reduction, 2003; p.30, MINISANTE.Note: HIS is Health Information System.

b. Priority programmes

There are four priority programmes, which are (1) provision of basic health care;(2) specialised interventions into major health problems; (3) development of health infrastructure and financing mechanisms; and (4) improvement in management of health services. The major interventions are disease control and development of the health system.

Disease control

Malaria: In 2002, there was a 4.4% increase in new cases of malaria (equivalent to 12,490 per 100,000). Difficulties in isolating the underlying reason remain; possibly the result of a worsening situation or improved diagnosis/detection. In 2002, a new treatment scheme was introduced and anti-malaria drugs were subsidised by 60%. The multisectoral roll back malaria approach was extended to include the participation of the private sector and subsidisation of mosquito nets for pregnant women and under-five children throughout the country. Sensitisation on the use of mosquito nets continued, whilst general coverage by mosquito nets was estimated to be 12%, a 2% increase from 2001.

Tuberculosis. Detection was available in 50% of health facilities in Rwanda while 100% are reported to have used the appropriate treatment with failure rates of less than 1%. This is attributed to the use of DOTS (Direct Observed Treatment Short course) method. (Source: PNLT, Programme National de Lutte contre la Tuberculose)

Childhood diseases. In 2002, the immunisation rate was on average above 80% for all antigens, one of the best in Sub Saharan Africa. The strategy used was that of outreach to catchment areas. The year 2002 was the first in the implementation of the new vaccine combination GAVI (Global Alliance for Vaccines and Immunization).

Diseases with epidemic potential. Meningitis was reported to have struck in almost half of the country in 2002 but was contained by a massive vaccination campaign. Cholera cases are still reported on the shores of Lake Kivu and Ruhengeri. The lethality rate for all outbreaks was less than 10%. In WHO norms, this means that diseases with epidemic potential were effectively handled.

HIV/AIDS: A multi–sectoral approach in the fight against HIV/AIDS has shifted the focus from a simple health issue to an economic and national challenge. The Ministry of Health is responsible for treatment and research while the National Commission Against HIV/AIDS (CNLS) is charged with sensitisation and resource mobilisation at national, provincial, district and community levels. The Association of People Living with Aids has strengthened with strong emphasis on income generating projects. The price of ARV’s fell from an average of 160,000 RwF per month in 2001 to a minimum of 30,000 RwF per month in 2002. This has boosted accessibility to the drugs by the relatively poor.

In 2002, some private sector enterprises and organisations started programmes to assist and cover the ARVs costs of their employees. HIV/AIDS awareness in Rwanda is estimated to have risen to 70% of the population. The prevalence rate is estimated at 13.5%. In 2002, the prevention programme for HIV incidence from seropositive mothers was extended to 10 provinces of the country against 5 provinces covered in 2001. Popular radio–dramas continued to promote the campaign of disease prevention.

Reproductive health. The national fertility rate is estimated at 5.8. In 2002, a national reproductive health policy was prepared. The sensitisation campaign on family planning continues in health centres, media and special clinics. The percentage of births attended by qualified health personnel increased from 32% to 35%. A study on factors behind preference by pregnant women to deliver at home instead of health centres was carried out and results will be implemented in 2003. The opportunity to include reproductive health in functional literacy is being considered in tandem with the education sector through the sector–wide approach.

Achievements

• - Malaria drug subsidy offered, mosquito net coverage increased

• - Control of tuberculosis through DOTS

• - Good vaccination coverage for child diseases

• - Anti-HIV/AIDS campaign has intensified through multisector approach and access to ARV improved by lowering prices

Challenges

• - Malaria is still a number one cause of morbidity and mortality

• - Mitigation of diseases with epidemic potential

• - Change of behaviour to address the HIV/AIDS pandemic that has become an economic concern

Development of the health system

Health district development. In 2002, the focus was on the decentralisation of health services and on community participation. National referral hospitals continue to depend on the Ministry of Health budget. In terms of infrastructure development, one health centre was rehabilitated and completed while two more were rehabilitated but not yet completed. In 2002, eight health centres were constructed and five of them officially opened. Moreover, one District hospital was constructed and the CHK Radiology unit completed.

Pharmaceutical sector development. A list of pharmacies licensed for operation by MINISANTE was released in 2002. Inspectors tracked down falsified drugs. CAMERWA is a national institution that promotes the supply of essential drugs using a list provided by MINISANTE. It has been responsible for provision of drugs and ARV at affordable prices. In 2002, the supply of drugs was relatively efficient given that on average there was no shortage lasting more than 1 week in a month. It is intended to decentralise the services of CAMERWA as it becomes more efficient.

Human resources and access. In 2002, 15 doctors and 160 nurses were recruited, but acute shortage is still noticeable in Health Districts. Human resource development especially training is a major contribution to quality improvement in the health sector. In 2002, eight grants for advanced specialisation overseas were granted. A project to receive Cuban doctors placed in rural areas was initiated. In terms of physical access the number of people per doctor declined considerably from 54,500 in 2001 to 50,000 in 2002 while the number of people per nurse also declined from 5,555 to 5,000. Access will also improve through the use of rural health workers and rural ambulances will be set up in 2003. (Source: SIS/MINISANTE, Système d’Information sur la Santé)

Health Sector financing. As mentioned in Chapter 2, the health sector is one of Rwanda’s sectors with the most serious underfunding issues. Whilst it figures under the PRSP core programmes¹², it does not succeed in attracting adequate funds for reaching the objectives of these programmes. One of the problems is the erratic character of development aid to the sector. As can be seen from (Table 4), shares of the health sector in the total development budget have been steadily reduced since 1998. A problem in the development budget is the attention HIV/AIDS gets. Whilst HIV/AIDS has to be addressed as a major problem, the overwhelming attention it gets from donors risks neglecting other parts of the sector.

In the 2003 budget, these problems were acknowledged and health received additional funding in the form of exceptional expenditure. This money was mainly used for the primary health care strategy, but is clearly only a temporary measure and underfunding will need to be handled in a more structural way. The start of the Sector Wide Approach is a first step in this process.

Efforts are made in cost recovery through user fees, but there is clearly a trade off between affordability and access. Mutuellles or health support systems have been adopted by many Rwandans and are developing into a convenient system of cost sharing in the health system. Financial mechanisms for health services were maintained, i.e., fixed fees, state subsidies and RAMA. Salary increase modalities were devised. In 2002, the introduction of contractual approach to financing in the health sector was initiated.

The execution rates of the health budget show an increasing trend. Together with the mentioned underfunding problem, this makes a strong case for more spending on priorities such as the mutuelles and the animateurs de santé.

Table 3.5:

Health Expenditure

^*Figures for 2003 are not outturns

Source: Ministry of Finance and Economic Planning, Flash Reports 1998-2001

Table 3.5:

Health Expenditure

	1998	1999	2000	2001	2002	2003*
%allocation in total recurrent expenditure	3	3,4	4,7	4,2	4,4
%allocation in total development expenditure	7,8	16,1	13,5	8,4	7,6	5
%share in priority programmes				13	10,4
%Recurrent budget execution	98,1	79,4	96,1	107,8	128
p.m. Total recurrent expenditure (RwF bio.)	75,3	86,5	89,3	107,4	129	149,7
p.m. Total Development expenditure (RwF bio.)	92,9	71,2	66,2	50	56,1	64,9

^*Figures for 2003 are not outturns

Source: Ministry of Finance and Economic Planning, Flash Reports 1998-2001

View Table

Table 3.5:

Health Expenditure

	1998	1999	2000	2001	2002	2003*
%allocation in total recurrent expenditure	3	3,4	4,7	4,2	4,4
%allocation in total development expenditure	7,8	16,1	13,5	8,4	7,6	5
%share in priority programmes				13	10,4
%Recurrent budget execution	98,1	79,4	96,1	107,8	128
p.m. Total recurrent expenditure (RwF bio.)	75,3	86,5	89,3	107,4	129	149,7
p.m. Total Development expenditure (RwF bio.)	92,9	71,2	66,2	50	56,1	64,9

^*Figures for 2003 are not outturns

Source: Ministry of Finance and Economic Planning, Flash Reports 1998-2001

Achievements

• - Access to health services realised modest improvements

• - mutuelles de santé are improving access to health

Challenges

• - Availability of doctors in rural areas is still a major challenge as only 1 out of 5 doctors is in rural areas

a. Policy issues and strategy

In this sector, emphasis is put on:

• Maintenance and rehabilitation of the rural road network to promote trade

• Encouraging greater competition in air transport

• Reduction of the cost of electricity by increasing domestic production

• Rural electrification to promote economic activities

• Encouraging competition in the area of communication

For better coordination of activities in the sector, the Government decided, in early 2003, to merge the Ministry in charge of water, energy and natural resources with that in charge of transport, public works and communication into one ministry in charge of infrastructure.

There a clear need for more investment in this sector and lack of financing is often cited as a constraint to achievement of the sector objectives. Analysis of the scenarios presented in the PRSP (more than 50% of the proposed increases under the two additional scenarios are for economic infrastructure) shows the significant financing need but also the necessity for better prioritisation with specified return rates in terms of impact on poverty as well as a clear identification of outputs expected from activities the ministry undertakes¹³. The public expenditure review in the transport sector, conducted in 2002, noted that some outputs are not well identified according to the Ministry mission of policy formulation rather than direct execution. Moreover, the review also revealed constraints due to the cash-budget system in achieving outputs planned in the MTEF. A study is ongoing on ways to achieve increased involvement of the private sector in the infrastructure sector as well as a public-private partnership.

b. Priority programmes

a. Policy issues and strategy

Building good governance is a critical priority for Rwanda as a response to the recent experience of genocide and long standing political instabilities. For Rwanda, good governance is a key variable in achieving poverty reduction and sustaining economic growth.

Box 3 shows a summary of policy issues and recent action that reflect on the progress of the policy on governance in Rwanda.

b. Priority programmes

An important action in the review period was the establishment of gacaca courts and giving them legal authority. The courts will provide employment to 258,208 local based judges. Some Training of Trainers course has been given to 780 of those judges. With 11,000 sites set up in 2002, the courts will provide another functional infrastructure at grassroots level. Indeed up to 30,000 prisoners were released and are awaiting the courts. The action is part of justice but also releases labour to households headed by the ex–prisoners. About 36% of local judges are women, an action that promotes gender sensitivity.

The courts being an adaptation of the traditional ways of resolving conflict are expected to be another means of reconciliation especially promoting the habit of telling the truth in Rwanda. Gacaca courts will inject into the rural economy RWF 47,542,809,721 budgeted to run them.

Constitution making has demonstrated the will of the government in promoting democratic process and promoting popular participation among Rwandans. In 2002, wide–ranging consultations were carried out inside and outside the country. Finally, in May 2003, the process was capped by a referendum. General elections are planned to take place before end–November 2003. Meanwhile there is an ongoing review of all laws.

A critical aspect of governance is the maintenance of security in Rwanda and in the region. The National Police is being strengthened and reformed to focus more on community involvement in safeguarding their own security. Already the rate of crime is estimated to have gone down by 20% because of community sensitisation to security. Rwanda has been an ardent supporter of the Lusaka Peace Agreement. The 38 battalions (about 23,000) of Rwandese Armed Forces in the Democratic Republic of the Congo were repositioned in Rwanda. Some 20,000 RPAs and 25,000 ex–FARs were demobilised and reintegrated into civilian life in 2002 and more will be demobilised to reduce the defence expenditure. Each demobilised soldier receives cash grants in excess of RWF 300,000 that is directed towards supporting them in livelihood activities. Between RWF 150,000 and 500,000 is recognition of service allowance (RSA) and RWF 1000,000 is reintegration fund, moneys paid within 6 months of demobilisation. A vulnerable support window (VSW) is a facility that offers professional training to the demobilised soldiers especially who have become as result of combat disabled. Savings are expected to help build a smaller but professional army and in terms of budget allocations, poverty reduction.

Unity and National Reconciliation Commission continues to be a strong partner in poverty reduction and promotion of participatory processes. Rwandans know through government action that reconciliation is imperative for development.

The Human Rights Commission has already published its annual report reporting interventions in violations of basic human rights as well as socio–economic rights. It has managed to open offices in all the provinces and with the conclusion of the Constitution will lead on developing clear indicators of human rights for monitoring purposes.

New organigrams for civil servants in central government line ministries were established and are being implemented. Some ministries were combined and other functions realigned. Some 509 members were redeployed particularly to decentralised units of government.

a. Policy issues and strategy

The role of the private sector as the engine of economic development of Rwanda has been made clear by government. The long–term policy objective is the emergency of a healthy private sector that leads economic growth in Rwanda. The promotion of the private sector in Rwanda is based on investment promotion, strengthening the financial sector, privatisation and improving the legal environment. The strategic areas are tourism, agro–industry, handicrafts and strengthening the export capacity of co–operations.

b. Priority programmes

Investment promotion and private sector representation. In 2002, the Government through RIPA (Rwanda Investment Promotion agency) sponsored studies on the creation of an Export Promotion Zone. In 2002, the Private Sector Federation (PSF) organised an international trade fair and a number of national ones in different provinces. In 2003, the Government organised an international investment conference in an effort to attract foreign investment to Rwanda. A study to identify the constraints on investment has been commissioned by the RIPA in 2003. The RIPA is also preparing a draft revision of the law on investment and is harmonising procedures with Rwanda Revenue Authority as regard to tax exemptions granted to investors. In addition, in 2003, the Government nominated a Secretary of State in charge investment promotion, tourism and cooperatives in order to emphasise the need for and coordinate investment promotion activities. The “partnership forum” for public–private partnership has been put in place as the appropriate framework for mutual consultation and increased private sector representation has been realised through participation in various policy–formulation working groups.

Financial sector reform. The performance of the financial sector has been a major concern to the government. In 2002, The NBR carried out audits of three commercial banks. As a result, restrictions were placed on two banks and supervision was increased. The Banque Commerciale du Rwanda (BCR) had its restructuring plan approved and is undergoing a recapitalisation that will lead to the offer for sale of the bank by end–2003. The banking sector’s stock of non–performing loans decreased in 2002 due to accelerated loan recovery procedures (voie parée) and the resolution of associated administrative constraints. An audit of the NBR was conducted in 2002. The arbitration Centre has been strengthened with the assistance of the Ministry of Justice and donors. It has been granted legal authority and additional judges have received further training in order to adequately staff the Centre. The recapitalisation of the Caisse Hypothécaire, which has been restructured into a housing bank, is still pending.

Privatisation. Privatisation is a government policy aiming at increasing economic efficiency and improving the role of the private sector in the economic development of Rwanda. Out of 77 companies to be privatised 37 have already been sold. The government will sign a 5–year contract for the management of Electrogaz with a private operator by the end of July 2003. The aim of the operation is to increase the revenue of Electrogaz and the number of connections to the water and electricity networks in the country. The sale of a majority stake of Rwandatel to a strategic investor is expected by the end of 2003 and in the tea sector, two units, Mulindi and Pfunda, will be privatised in 2003. This will pave the way for the privatisation of the whole sector in subsequent years. Furthermore, the Rwanda regulation agency has become operational. One of the challenges of privatisation will be to find a way of fostering Rwandans’ participation in order to create a class of entrepreneurs.

Other sectors. A centre to cater for the development of small and medium enterprises CAPMER was restructured into a private non–profit organisation and will be given legal status in 2003 to become fully operational. The legal reforms needed by the private are still to be identified and a challenge in this area is the full operationalisation of the mechanism for tax appeal. A Bureau of Standards was established and is charged with control of quality in manufacturing and goods being sold. The development of a Mining Code accommodating also small miners has been a continuous challenge for the last 5 years. The Ministry in charge of mines and quarries has to intensify the regulation of artisanal mining in relation to environmental conservation, as is the case with quarrying. Tourism is getting an increasing attention from the Government and the office (ORTPN) charged with tourism has increased publicity on tourism on its web site. In addition, a strategy for the development of tourism in Rwanda has been developed in a participatory manner. Another key achievement, in 2002, is the development and adoption by the Government of a strategy for the coffee sector. A tea sector strategy is also being drawn.