Poverty Reduction Strategy Paper Progress Report

Rwanda’s Second and Third Reviews Under the Poverty Reduction and Growth Facility, and Request for Waiver of Performance Criteria are discussed. After an extended period characterized by a strong expansion of economic activity, real GDP growth is estimated by the IMF staff to have slowed to 0.9 percent in 2003. On the structural side, performance criteria on the revision of the tax law and preparation of the financial instructions for more effective expenditure management have been met.


Rwanda’s Second and Third Reviews Under the Poverty Reduction and Growth Facility, and Request for Waiver of Performance Criteria are discussed. After an extended period characterized by a strong expansion of economic activity, real GDP growth is estimated by the IMF staff to have slowed to 0.9 percent in 2003. On the structural side, performance criteria on the revision of the tax law and preparation of the financial instructions for more effective expenditure management have been met.



Rwanda’s Poverty Reduction Strategy Paper (PRSP) was produced in November 2001 following extensive consultations with all stakeholders and based on participatory assessments and quantitative surveys on households living conditions. The Joint Staffs of the World Bank and International Monetary Fund endorsed the strategy in July 2002, as a sound basis for concessional assistance.

This is Rwanda’s first PRS progress report, based on developments in 2002 and, where possible, in 2003. As a consequence the report cannot demonstrate a direct causal link between PRS implementation during the period reviewed and impact on reduction of poverty. Instead, this report focuses on progress achieved in the adoption of the PRS as the national planning framework and associated medium-term, processes and actions.

In describing and analysing achievements and processes associated with PRS implementation, this report aims to share with all our stakeholders the strengths and weaknesses, successes and constraints that we have faced in implementing the PRS. Our wish is that the lessons and discussions that so arise should inspire and stimulate improved execution in the future.

This report is intended to address the need for information and our [Government’s] accountability to the Rwandan population whose priorities are identified in the PRSP. In particular, this report and its subsequent discussion should address those Rwandans living in poverty who will be the primary beneficiaries of progress in PRS implementation. We aim to reinforce popular ownership of the strategy and by broadening the monitoring and evaluation of commitments by all stakeholders in poverty reduction, to promote mutual accountability.

This first PRS–Progress Report is the first step of a process of annual assessments of interventions and actions towardspoverty reduction in Rwanda.


This report is based on various sources of information, notably:

  • - Performance analyses for 2002 conducted in health and agriculture sectors and the energy, water and sanitation sub-sector as well as a joint review in the education sector.

  • - Other sectoral performance data are drawn from routine administrative reporting systems of government ministries and agencies.

  • - Data on macroeconomic performance and prospects is drawn from the bi-annual economic bulletin of the MINECOFIN together with the Government of Rwanda memorandum of economic and financial policies, produced following the February 2003 IMF mission.

  • - Data are also drawn from the 2002 budget execution report and reports of the public expenditure reviews conducted in 2002 in the transport and agriculture sectors.

  • - In preparing for this report, the government commissioned a light participatory survey exploring the degree to which grass root populations express their satisfaction with public services and private initiatives towardspoverty reduction.

  • - Finally, the report takes into account recommendations of the annual Government of Rwanda and Development Partners meetings and those of the October 2002 Strategic Partnership for Africa (SPA) mission to Rwanda.

Therefore, the process of preparing and producing the report entailed a number of steps. This began with performance analyses for 2002 being conducted ministries responsible for the priority sectors of health, education, agriculture and energy, water and sanitation. Seminars were then organised for all stakeholders in respective sectors to validate the reports of these analyses, while a joint review took place in the education sector. Successive drafts of the reports were circulated and comments from different sources taken into account. On production of the first draft, a national seminar was organised to validate the process of this PRS–PR and allow open the debate on the report in order to improve it and identify weaknesses to be addressed. Finally, a simplified version of this report will be translated in Kinyarwanda shortly and largely circulated among the population.


Implementation of the PRS has been and will continue to be guided by the following keyprinciples:

  • - Policy coherence, horizontally between sector strategies and vertically between national policies, sector strategies and decentralised entities development plans,

  • - Needs and expenditure prioritisation, to ensure that strategies are consistent with the availability of resources,

  • - Continuous learning, through regular monitoring and evaluation to allow the development of evidence-based and results-oriented policies,

  • - Partnership, to ensure that all stages of the PRS, from formulation to monitoring and evaluation via implementation are fully inclusive and participatory

As noted above, this Progress Report will focus on achievement in PRS priority sectors, on the processes of their execution and constraints in implementation. It also makes recommendations for public action required to address any identified shortfalls. We also strongly recognise the importance of identifying progress in impact terms and where possible we have sought to identify change in certain impact indicators.

This report consists of three chapters; the first on Rwanda’s macroeconomic framework, public expenditure management and sector strategy process; the second discussing progress and constraints with regard to strategies, programmes and actions in priority sectors and crosscutting issues and, finally, the third chapter sets out monitoring of PRS implementation and poverty analysis.


This chapter addresses the context within which the PRS is being implemented. It sets out national frameworks for macroeconomics and public expenditure and examines planning for the PRS, including the sector strategy process. More detailed sectoral discussions follow in the next chapter.


The PRSP recognises that economic growth is a prerequisite for long–term poverty reduction in Rwanda. The challenge lies in achieving and stabilising real economic growth between 7–8% over the next 15 to 20 years. Rwanda’s medium–term macroeconomic objectives are therefore to (i) achieve annual real GDP growth of at least 6 percent; (ii) keep annual average inflation at 3 percent; and (iii) maintain gross international reserves equivalent to at least six months of imports. (For an overview of Rwandan economic and financial variables, Annex 1).

The year 2002 was favourable in this regard. Real GDP Growth was as high as 9.4 percent (2.4 percentage points higher than programmed) compared to 6.7% in 2001. The good results mainly reflect an exceptional harvest in subsistence crops due to good rain and above average performance of the construction sector. From a longer–term perspective, the fall in export prices for coffee and coltan were worrying. For 2003, provisional first quarter figures are encouraging: harvests are better than first expected, the construction boom continues, whilst electricity output, a reliable indicator of strong economic activity, registered a marked increase (+25.7% during the first four months over the corresponding period of 2002). The tertiary sector also continues to show strong performance. As a whole, the Rwandan authorities are confident that the conservative objective set for growth in the 2003 programme (+3.2 %) will be met, and may even be exceeded.

In general, the macroeconomic framework continues to be strengthened. Regular Debt Sustainability Analyses (DSA) are being conducted, a macroeconomic model is being developed (in the context of a Poverty and Social Impact Analysis or PSIA, see Annex 2) and partners have identified sources of growth as a key area for future research in Rwanda.1

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.

Tax Framework 2002–2003

Taxes introduced in 2002

  • - Increase in VAT from 15% to 18%

  • - Import duty rates for COMESA members reduced by 80%

  • - Reduction in the corporate income tax rate from 40% to 35%

New taxes introduced with budget 2003

  • - tax on professional remuneration (TPR)

  • - extension of product range subject to excise taxation (cars and powdered milk)

  • - increase in the excise tax rate on industrial beer from 40 to 57%

  • - adjustment in the structure of taxes on international trade (see further)

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.

Figure 1.
Figure 1.

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.

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.

Achievements in the macro-framework

  • - Main macro targets for 2002 were met, 2003 targets are expected to be slightly missed

  • - 2002 Monetary and Fiscal Frameworks adapted due to unpredictable flow of funds

  • - Domestic resource collection is strengthening


  • - Trade Balance worsened and exports development is a big challenge

  • - Financing the poor remains a challenge


The major link between PRSP implementation and public expenditure management is the Medium Term Framework (MTEF). The MTEF, introduced in 2000, links the planning framework with the available resources over the medium term (Annex 3). and aims for a budget geared towards results and poverty reduction. To be successful in this aim, as was noted in the PRS, Rwanda requires additional expenditure as well as more sharply focused strategies. Yet the current macro framework leaves little room for shifting resources strategically. The PRSP calculated costs for more expansionary financing frameworks based on estimates by the various sector ministries and the PSIA examined these in more detail. In addition, the National Investment Strategy (NIS) identifies anticipated funding gaps in certain sectors to reach PRSP objectives, of which 56% are in the infrastructure sector (see Chapter 3 for more detail on specific sectors).

Currently, the monitoring part of the Public Expenditure Framework needs strengthening to be able to check if the programmes retained in the finance laws reached their stated objectives. Government then intends to further build the macro–economic case for the poverty–reducing effect of increased expenditure, linked with the monitoring framework outlined in Chapter 4.

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

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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 30th 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).

Achievements in public expenditure management

  • - MTEF is very good in budget preparation

  • - Share of priority programmes in budget continue to rise as planned

  • - Budget ceilings were much better adhered to

  • - Establishment of budget committee in each ministry


  • - The PRS remains under-resourced; PSIA recommendations should be taken into account

  • - Put in place and/or strengthen pro-poor programmes (HIMO, CDF…)

  • - Development and recurrent budget still need to be integrated

  • - Budget execution monitoring remains a challenge a.o. due to problems with the cash budget and lack of capacity to plan towards results

  • - Legal and regulatory framework governing the budget process is still a challenge


The Rwandan PRSP is based on the participation of all development stakeholders in the design, implementation and monitoring of poverty reduction policies and programmes. Organisations of civil society, NGOs, church organisations, the private sector and external partners all participated in consultations and drawing up the PRSP. Starting from the adoption of the PRSP in November 2001, development partners have begun to buy into PRSP priorities and guiding principles. The translation of the document in French and a popularised version in Kinyarwanda helped in widening the knowledge of the PRSP context at the grassroots level.

Within government, the dynamic linkage between PRSP, PRGF, MTEF, NIS and the budget is expected to grow stronger over the coming year. A group comprised of major departments within MINECOFIN and MINALOC (DIG) is meeting on a regular basis to oversee MTEF implementation. Also, a system of desk officers was set up in order to improve communication between the key PRSP co–ordinating agencies within MINECOFIN (SPPMD, budget and CEPEX) and line ministries.

Partnership between government and external actors is being promoted through initiatives such as the Annual Development Partners Conference and active enhancement of Public – private partnership (see Chapter 4). In the African context, Rwanda will soon become a member of both COMESA and the East African Community, while it has been an active pioneer in the New Partnership for African Development (NEPAD).

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

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Achievements in sector strategies

  • - In 2002 the PRSP process was especially strengthened across government, with special attention for the decentralised structures

  • - Some success stories are emerging in sector strategies

  • - Clusters will reinforce the sector strategy process and improve co-ordination amongst partners

  • - The PRS process is being inserted into the budget cycle.


  • - Sector strategies are still uneven across sectors



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

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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


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

  • - Use of fertiliser is crucial to increased productivity

Livestock development

According to MINAGRI estimates for various livestock related products, effective demand is currently ½ of the total requirements. The current level of production meets only 39% of milk, 86% of meat, 55% fish and 10% of eggs. The apparent gap in supply and demand reflects the need to raise the levels of productivity in the sub sector.

To improve productivity in the sub sector new cross and hybrid herds were introduced. The result of this is an increase in milk production despite the decline in the total number of cattle. However the number of cross herds is not enough (less than 1% compared with 98.4% of local breed) and a national programme for artificial insemination and increasing animal food supply continues to get priority attention in policy. Credit schemes were put in place to facilitate acquisition of livestock.

Animal health is a key element of livestock development. Recognising the economic impact of animal diseases, their hindrance to access to international markets the Government of Rwanda, undertook serious measures during 2001 to 2002, to put in place strong and sustainable control mechanisms to eradicate the diseases especially those by livestock international organisation.

Moreover, MINAGRI strengthened the capacity to monitor internal and cross border movement of livestock and a national veterinary laboratory to verify the effective eradication and control of the diseases. The results from the laboratory are ordinarily preconditions for the issuance of a certificate from international livestock organisation.

Fish production increased from 40,000 tonnes to 365,000 tonnes in 2002. Programme to plant fish in Lake Bugesera has continued. In Lake Kivu, however the need is to enforce the law regulating fishing practices. Fishing in Lake Muhazi is expected to start in September 2003.

Key achievements

  • - Improved breeds are gradually being introduced to the farmers

  • - Livestock restocking reached or passed the 1990 level

  • - Animal products are generally increasing


  • - The market for animal products is not satisfied

  • - Achieving increased productivity in livestock sector

  • - Effective control of livestock diseases

Forestry resources

To foster forestry management and protection, a forestry policy started being evolved in 2002. Its aim is to allow for optimal utilisation of forestry products. It is planned that 100,000,000 trees shall be planted on 62,500 ha. Rwanda Forestry Management Support Project (PAFOR) has a line of credit of RwF 500 million to promote private sector to invest in forestry sector. In 2002, 32,200,000 tree seedlings were planted and an inventory showed the existence of 31 associations dealing in nurseries privately.

Achievements under forestry resources

  • - Sensitisation campaigns led to planting of more trees in 2002


  • - Reforestation and proper use of woods are perpetual challenges

Management of water and soil

There is an important interface between the environment and agricultural production in Rwanda. A National Soil Conservation Commission has been established. In this regard, a number of technicians were trained in forestry management in 2002. A study on marshlands was completed in 2002 and another for 1650 ha is underway.

Already in 2002 350 ha of marshland was rehabilitated and reclaimed. A study to develop a Master plan on Marshlands was carried out. Rice schemes were rehabilitated and a new area in Umutara province was developed for rice growing. Retention dams, valley dams/tanks and water harvesting especially in imidugudu will be created.

Achievements under management of water and soil

  • - Study and development of a master plan of marshland is a useful step


  • - Management of water and soil conservation is important challenge to productivity in Rwanda

  • - A major challenge is the comprehensive protection of hillsides that also affects conditions in the valley

Extension and marketing

Government through MINAGRI continued to promote marketing and commercialisation in agriculture. Extension services are being strengthened and decentralised. A major strategy has been to meet the most pertinent training needs in the sector. In 2002, 150 technicians underwent Training of Trainers Course (TOT). Other training to technicians was 46 in animal husbandry, 20 in rice production and 51 farmers and technicians were trained in post harvest conservation.

Also, 1,000 people were trained in forming associations, running small projects, production techniques and financing projects. Efforts are underway to promote the private sector in extension provision through specialised service agencies, farmer cooperatives and associations.

For both organic and inorganic fertiliser 3,200 plots were used all over the country to demonstrate their advantages. Some 11 farmers associations were visited by Ministerial officials with the intention of advocating for the use of associations in improving agricultural marketing.

Development of traditional and new export opportunities will be necessary for commercialisation. Market Information System on regional and international requirements shall enhance the marketing process.

Achievements and challenges

  • - Training efforts were made


  • - The challenge is the trainers to train the farmers.

  • - Availability of market information to producers.


On the planning level, MINAGRI has been designated as a facilitator in the planning process of the agricultural sector with the lead donor being the World Bank. It is expected that a sector strategic plan will be produced in 2004 with a proper costing of the financing requirements for the sector. The rural development strategy is being developed under the facilitation of the MINAGRI.

In view of the vital role the sector is expected to play in poverty reduction, MINAGRI will undertake some internal strengthening. A human resource shortage in MINAGRI is a challenge that should be addressed. Besides personnel in the ministry, every district requires an extension officer if the strategy has to be operationalised. An effective working relation structure between extension officers, NGOs, farmers associations, private sector and local leadership needs to be strengthened.

The findings from the Public Expenditure Review conducted in 2002 showed that agriculture faces shortages of financial and human resources. The average deficit between programmed and allocated funds was about 39% for the 2002–2003 budget. It was 40% in the 2000 budget.

Employment Promotion and Labour-Intensive Public Works

In order to promote employment and monetisation in the rural area, the Government has recently developed a multisector programme of labour-intensive public works.

Main areas of intervention include:

  • - Roads infrastructure

  • - Agricultural and environment protection infrastructure

  • - Water supply

  • - Schools and health infrastructure

  • - Other specific labour-intensive programmes

  • - Labour-intensive programmes in urban area

The operational strategy goes through:

  • - Support to districts in drawing community development plans

  • - Capacity building at all levels

  • - Broad participation and involvement of all ministries and other private sector agencies

  • - Popular participation


3.2.1. Education

a. Policy issues and strategy

The main long-term priority in the Education sector is quality basic Education for All. Targets are Universal Primary Education to be achieved by year 2010 and Educational for All (EFA) by 2015 6. Issues of equity and functional literacy are given special attention. Access and equity at all education levels should be coupled with ensuring quality and relevance so that education can fully play its vital catalyst role in economic growth and poverty reduction. Current strategies put emphasis on skills development giving special attention to science and technology, especially ICT. Strategies underpinning this policy are the reform of teaching methodology, revision of curriculum, adequate provision of pedagogical material, teacher training and inspection of schools. Institutional capacity building at decentralised level and community participation are key cross-cutting issues. Priority for new facilities is given to districts with acute shortage of education centres and infrastructures 7.

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

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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.


  • - 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


  • - 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.


  • - Considerable growth in teacher training and distance learning

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


  • - 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.


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

  • - Cost sharing schemes are being established


  • - 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

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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

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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.


  • - 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


  • - 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

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Figures for 2003 are not outturns

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


  • - Access to health services realised modest improvements

  • - mutuelles de santé are improving access to health


  • - 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

Road transport

This sub-sector received, through the national road fund (FER) in charge of road maintenance, the most important share of the sector budget allocation. Main roads that were maintained and rehabilitated are Butare—Cyangugu and Nyakizu–Nshili.

Roads of Kigali–Gitarama (48 km) and Kibuye–gisovu (43 km) were rehabilitated while tarmacing of the road Gitarama–Kibuye (42 km) was completed.

Feasibility studies were conducted for rehabilitation of Gitarama–Butare–Akanyaru (111 km) and Kigali–Kayonza (75 km) roads. With regard to other bitumised roads [such as Bazirete–Gisenyi–Nyundo (12.8 km), Giticyinyoni–Munindi–Musasa, Kigali–Kayonza and national roads in Kigali–ville (12 km) and elsewhere, etc.] and roads to be built, progress consisted mainly of preparatory works and technical studies.

The ministry started, in 2002, to decentralise roads maintenance and, from October 2002, agreements were signed with decentralised entities for the rehabilitation of 2983 Km of national roads over three months (the maintenance will involve private sector and associations). Increased population participation in roads and bridges maintenance is expected through the labour intensive public works (HIMO) programme mentioned in Box 2.

Some national non–bitumised roads in very bad state were rehabilitated in the course of the year, [notably Gikongoro–Murambi, Butare–Kibeho, Butare–Akanyaru Bas continuing in 2003, Rugende–Karenge, Rwamagana–Gishali, Kibeho–Ndago–Munini (29 km), Ruhango–Gitwe (17 km), Pindura–Bweyeye (30 km), Kicukiro–Pont kanzenze] while for others, work are ongoing or were postponed to 2003 [Butare–Akanyaru Bas and Cyegera–Nyamiyaga (20 km)] due to relative shortage of equipment.

Air transport

Feasibility studies for the rehabilitation and extension of Kanombe airport are completed and works are to begin in 2003. It is envisaged to internationalise Kamembe airport in 2003.

Grass root transport and communication

One element of the community based activities ubudehe is to mobilise local resources in managing community roads. The activities can also be carried out through the public works programme (HIMO) mentioned above, which has been designed in 2003.

Energy for the formal sector

Priority programmes include an electrification master plan, increased energy production, promotion of methane gas and alternative sources of energy.

A contract has been signed with a private firm for the private management of Electrogaz to be effective by end–June 2003. Meanwhile, in 2002, economic and financial studies were conducted for the rehabilitation of Mukungwa, Gihira and Gisenyi centrales as a first step in the effort to increase production. Feasibility studies were also conducted for rehabilitation of lines and grid extension. Implementation of the project is now under the responsibility of Electrogaz. Negotiations are ongoing under the Nile Basin Initiative for the construction of a barrage at Rusumo falls in order to promote regional integration of the energy sector.

Extraction and use of gas methane continued on a modest scale for use in the brewing industry. Two companies signed with the government in 2002 to assist in exploitation of methane gas.

Energy for poor households and rural entreprises

MININFRA has conducted, in 2002, feasibility studies for rural electrification through the use of micro–centrales and geothermal energy.

Communication infrastructure

Privatisation of Rwandatel is on the drawing board and is expected at the end of 2003. The operation will increase competition in the telecom sector and allow more access to telephone services, including in rural areas through the support of a Universal Access Fund. Meanwhile promotion of private investment in telecommunication has started.

Water and sanitation

The MININFRA is developing a Water Sector Strategy. A seminar on Water Resource Management was conducted in 2002, which offered recommendations on better sectoral coordination. The service in charge of water sources management in MININFRA has been undergoing enhancement (human and equipment) during 2002 and using the GIS a Hydrogeological map has began being drawn in November 2002. A revision of the Law on Water to address water resource management issues is ongoing.

In 2002, efforts were increased to enhance rural water supply and 160,000 people obtained access to potable water for the first time, mainly in three provinces (Umutara, Cyangugu and Gitarama). The rural water provision network continued to be rehabilitated in different places and more rehabilitation is envisaged for 2003. To improve the maintenance of water provision infrastructure in rural areas, the MININFRA has made efforts towards sensitisation for community management of these infrastructures. In addition to sensitisation campaigns and training of the population in water management, the MININFRA also encouraged participation of local authorities and the population into the planning of water and sanitation infrastructure locations.

Urban water supply will be improved by strengthening the institutional capacity to manage the system. Electrogaz, the public utility in charge of water provision in urban areas is being restructured and its management will be privatised. Projects for the rehabilitation of urban water provision infrastructure in Kigali and other towns are envisaged after this.

A conference on Sanitation was held in 2002 and sensitisation took place in five provinces. Sewerage systems were built in Kimironko and Kibungo prisons. As mentioned above, some population were trained in water management and sanitation in some districts as pilot cases. Concerning sanitation in urban areas, especially a number of places in Kigali, some private sector initiative are supplementing the lack of proper public sector sanitation service.

Key achievements

  • - Ongoing maintenance of roads through the FER

  • - Progress in promoting private involvement in gas exploitation

  • - Contract for private management of Electrogaz to be signed by end-July


  • - Need for better targeting and prioritisation in view of insufficiency of available resources for maintenance of the entire roads network

  • - Use of labour intensive approach for roads and bridges maintenance

  • - Development of means of transport and communication at the grass root level

  • - Development of alternative sources of energy

  • - Need for rural electrification


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.

Governance and its Importance for Poverty Reduction in Rwanda

Government considers seriously the role of good governance in the economic transformation of Rwanda.

  • √ A five-year plan has been designed.

  • √ Demobilising the army and improving the national policy, as well as to ensure the state of national security is stable.

  • √ To promote and foster national reconciliation.

  • √ Respect human rights through ratifying international conventions and promotion civic education.

  • √ In promoting justice and rule of law, there is introduced gacaca traditional courts and related legislation such as work in place of incarceration (TIG).

  • √ Decentralisation in terms of delegation, devolution and deconcentration of power and empowering CDCs and setting up of CDF.

  • √ Reforming the civil service

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.


Decentralisation is identified as a priority in the PRSP. It is part of the Government of Rwanda’s drive in bringing decision–making power to the level where results are most felt. The Government level responsible for elaborating decentralised development plans is the district.

The first phase of the democratic decentralisation effort, institutionalising decentralised governance by articulating the policies and legal frameworks, has been largely achieved. The second phase focusing on implementation is now underway.

Most issues to do with fiscal decentralisation have been covered in Chapter 2. Suffice to say here that, together with the increasing flow of funds from the centre to decentralised government entities, there is a huge capacity requirement. Training is underway but coverage of training is still very uneven.

Apart from channelling funds to districts and identifying sound programmes, the CDF will also play a redistributing role in allocating funds according to the relative population, poverty and existing programmes the district has. Further, CDF programme identification and approval procedures take into account PRSP priorities.

Ubudehe (see Box 4) is to become the main planning tool gathering information at the community (cell) level and as such informing the development of the planning process at district level. The province will perform the function of gathering information and take on more practical implementing tasks from the ministries (e.g. currently in the education sector).

All districts have currently produced an MTEF (three–year plan) and are in the process of completing their five–year plans.

The final goal is a planning process, where information from the grassroots level makes its way up to the central level through an iterative process. The exact channels for this are in the process of being developed—mainly through “Rwanda’s five–year decentralisation implementation programme”. see Annex 9 shows how the different government levels will work together, where RALGA (Rwanda Association of Local Government Administrations) will be the focal point for training efforts.

The link between the sector strategies and decentralisation will be crucial in achieving the PRSP goals. For this, a decentralisation focal point has been established in each ministry, which will be assisted by a decentralisation support unit.

Ubudehe mu Kurwanya Ubukene

Rwanda’s decentralisation process goes down to the lowest administrative structure: the cell. The Ubudehe approach makes the community come together to identify their problems, prioritise them, find solutions and eventually implement the retained approach, and this all in a participatory way through institutions that have been set up by the population themselves.

Funds for implementing these collective actions (e.g., buying goats for manure, water systems, drainage...) have been coming forward and now the whole province of Butare has been through this process, while in six other provinces people have been trained at the cell level to implement this methodology. Unfortunately, the envisaged information centre has not been set up due to lack of funds, but instead district experts (e.g., agronomists) help the cell to address technical problems.

Two evaluations were carried out regarding Ubudehe and both were favourable to the approach, philosophy and commitment of all actors involved. This opens the way for rolling out the programme nationwide. The remaining provinces will be funded in 2004 (at the moment 1000 are foreseen for each cell). It is planned that cells will continue to be funded—for two or three years, and that afterwards the cell will be able to make it’s own demand through the CDF channel.

Key achievements

  • - The government has restored peace and security, consolidated the rule of law and constitutionalism and respect of human rights

  • - A new Constitution was adopted in May 2003

  • - Decentralisation of decision making and planning has been undertaken

  • - Prerequisites for long-term reconciliation have been laid

  • - The Government has laid an institutional frame for accountability and transparency


  • - Genocide cases are to be finished in integrated approach involving reconciliation through gacaca

  • - General elections to take place by end-2003


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.

Key achievements

  • - Increased private sector representation in policy formulation and public-private partnership

  • - Considerable investment promotion activities through RIPA in collaboration with the PSF

  • - Significant progress in financial sector reform and privatisation

  • - Progress in the formulation of a comprehensive strategy to unleash the private sector in Rwanda


  • - The Ņone stop shop’ still have to be made fully operational

  • - Finalisation of a strategy to unleash the private sector and integrate it with other sector strategies

  • - Setting up and operation of a mechanism for tax appeal

  • - Privatisation to be conducted in a way that fosters Rwandans’ participation


Technology: Technology especially ICT is a major priority to enhance the capacity of the human resources and to reduce the cost of doing business. Rwanda Information Technology Authority (RITA) was established. The ICT plan is now being implemented and ICT is a mandatory function in every institution of higher learning. In addition, networks will be extended to every district and school in the next 5 years. Research is reported by MINEDUC to be still underway to determine the relevance of technologies to the lives of the poor.

Gender: Gender equality is a key policy of the Rwandan Government. MIGEPROFE continued to advocate and plan for gender development in 2002. The ministry has prepared a National Gender Policy and a strategic plan in a participatory manner, which are ready to be presented to Cabinet. Working modalities and training needs for gender focal points in ministries and provinces have been defined as a part of the implementation of the strategic plan. The gender budgeting initiative framework is in place to insure that PRS implementation takes gender concerns into consideration. The initiative was launched as a pilot project in five ministries in the 2003 national budget, whilst all provinces have been trained for using the methodology in the 2004 budget.

MIGEPROFE mobilized various women’s organizations and provided them with technical and financial assistance to integrate gender issues into the new Constitution. 30% of the new senate will be women and women’s issues will be taken forward by the gender Commission and the gender Observatory. The Ministry contributed to the National Functional Plan by incorporating the girl in Education for All Plan of Action in Rwanda. Out of RwF 408,316,663 budgeted for in the 2002 financial law for gender RwF 345,248,000 was released (84.5%).

Employment: Employment is at the heart of the Rwandan public and private sector development policy. MIFOTRA is developing a National Employment Policy and youth employment will receive appropriate attention. Vocational Training is being promoted by MINEDUC to address the question of youth unemployment.

The PRS noted the importance of vocational education centres in poverty reduction for the youth but a critical problem has been their state of disrepair. In 2002, some rehabilitation work was completed. The content and form of skills provided will be reviewed and it is planned to establish one centre in each district.

Capacity building: Capacity building has been mentioned in various parts of this report. To reiterate, the importance of capacity building in Rwanda is closely related to the process of post genocide reconstruction. People, equipment and processes were destroyed during the genocide. The strategy has been to incorporate capacity building in every sector strategy. The PRSP suggested creating an enabling environment consisting of inbuilt incentives to retain the skills accumulated in capacity building. The latter strategy has been caused by high turnover of trained personnel in key ministry to better paid jobs in the private sector or in NGOs

Environment: In 2002 an environment policy and draft bill was drawn. A draft bill for the proposed Rwanda Environment Management Authority was also prepared. Government continued to strengthen and collaborate with various players in environment protection. MINITERRE has commissioned different studies on environment impact of some economic activities in Rwanda throughout the year 2002. District committee on Environment and Hygiene/Sanitation were constituted. Government of Rwanda has prepared a convention reflecting the environmental awareness in Rwanda and has ratified the international conventions on environment.

Imidugudu: Government has continued to promote the group settlements imidugudu and to promote capacity in the planning and management of Imidugudu including support to design a Scheme of Land Utilisation and cadastral plans for the towns. The Cabinet approved the report on resettlement and housing needs for the vulnerable produced through the “Brookings Initiative process”. Some NGOs continued to support building houses in imidugudu. ADRA has completed 450 houses but this cannot satisfy the needs for 192,000 homeless households identified by the study. A donor conference to mobilise the remaining funds is planned for 2003.

Intra rural and rural—urban differentiation: Vision 2020 strongly advocates for reduction of inequality over the next two decades and the PRSP continued to promote pro-poor growth through agriculture transformation and other economic sectors wherein the majority of the poor generate incomes and access paid jobs. Addressing inequality is an important part of poverty reduction. Changes in inequality over time in Rwanda are difficult to ascertain due to differing methodologies and specific contextual factors. Whereas inequality may not be as a serious issue in Rwanda as in some other countries in the region existence of differentiation in the rural sector and between the rural and urban sector is certainly notable. It is planned to analyse the trend and levels of inequality in the next budget consumption survey due in 2005.

Levels of inequality in living conditions are quite notable within rural areas probably reflecting high land inequality with many households farming very small areas of land. The apparent rise in differentiation can be attributed to the war and genocide and massive movements of populations. For security and business purposes and in accordance with the Arusha agreement the returnees and those who were better off favoured to live in the urban areas.


The PRSP set out a framework and tools for monitoring, analysis and evaluation of the poverty reduction process. The logical framework contains inputs and outputs indicators as well as result–indicators and indicators of poverty reduction policies and programmes impact on living conditions.


As already mentioned in Chapter 2, in 2002 most expenditure of the recurrent budget on inputs was captured in the SIBET (Système Informatique du Budget de l’Etat) database (see Annex 4A). The system still has to cover execution of the development budget.

As for 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 under the cash budgeting makes it hard for ministries to adhere to this system.

In 2002, public expenditure reviews were conducted in the transport and agriculture sectors. These, together with public expenditure tracking surveys are an important source of information on resource utilisation from the central Government to decentralised entities. A second round of tracking surveys is being prepared.


Table 4.1 below presents outcome indicators with 2001 as baseline. Information on these indicators comes from administrative sources and/or surveys. Ministries of health and education normally produce reliable information and have adopted the GIS to localise interventions. However, because of limited capacity, some ministries have problems in reporting progress in their sectors. It is, therefore urgent to strengthen administrative reporting system in these ministries.

Table 4.1:

Outcome and Proxies Poverty Monitoring Indicators

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The Statistics directorate in the MINECOFIN, which is undergoing a restructuring that is expected to enable planned studies and surveys to be conducted, is currently conducting a CWIQ survey. The survey will allow projections of poverty trends on the basis of a multivariate analysis realised in 2002. This year, the survey was refined to include issues of satisfaction with public services, thereby, paving the way to the introduction of the citizen report card in the poverty monitoring system. In addition, provincial poverty profiles were produced in 2002 based on data from the EICV survey. However, capacity must be strengthened within provinces to enable them produce these profiles annually (Annex 11 shows indicators comparable between provinces).

Table 4.2 is intended to show trends in main performance indicators in relation to priority programmes. The targets will be further refined during the process of formulation of sector strategies and decentralised development plans in 2003. Moreover, the Ubudehe process may be used in the future to monitor interventions towardspoverty reduction at the grass root level.

Table 4.2:

Performance Indicators for Poverty Reduction Priority Programmes

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To be more effective in promoting continuous learning from all stakeholders, poverty monitoring and evaluation should be inclusive.

The clusters and the sector strategies resulting from them will facilitate co–ordination of interventions and coherence between PRS and budget cycles. Annex 6 proposes a framework to be aimed for in the medium term, which integrates the budget and the PRS cycles. The first 3 months of the year would be spent on sector reviews, drafted by the clusters themselves, feeding into the annual PRS progress report. After the PRS progress report, the donor conference and PRGF mission would take place, such that cluster recommendations could be discussed and taken into account before starting the budget preparation of the next year. At that time, donors should commit funds for the following budgetary year, to improve on predictability. Finally, the mid–year budget review, happening mainly due to the high unpredictability of resource flows, should go as it effectively reduces the annual budget to a six monthly one and consumes scarce resources. Budget execution would be reported on quarterly by ministries.

The most effective way in which government partners can insert themselves in this framework is through predictable budget support. Indeed, from an efficiency point of view, it is clear that budget support, if accompanied by credible institutions enhancing transparency and accountability, is superior to the traditional project approach14. This can happen through the central government system or through The Common Development Fund (CDF).

Championing this approach, the Government of Rwanda favours funding criteria and conditionalities extracted from the PRSP process; this means donors using a common set of indicators to streamline reporting requirements. This annual report provides a first step towards such a monitorable set of indicators, which would be reported upon in the annual PRS progress report. Government has recently developed a range of indicators to monitor progress in aid co–ordination (see Annex 7).

It is envisaged that the PRSP review of 2004 will closely follow this scheme. Whilst the process leading up to that document will be more participatory than the current progress report, no new PPA will be conducted, though more use will be made of poverty and planning related information at the decentralised level. A more concrete proposal for next year’s cycle, together with the monitoring framework, will be proposed at the annual donor conference, which for 2003 is scheduled for October.


Annex 1: Selected Economic and Financial Indicators 1995–2004

Table 3.

Rwanda: Selected Economic and Financial Indicators, 1995-2004

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Sources: Rwandese authorities; and staff estimates and projections.

All numbers are based on current exchange rates.

As a percent of the beginning-of-period stock of broad money.

The 2001 rates of growth assume that the excess external budgetary support at end-2000 would be used in its entirety to finance additional social expenditure during 2001.

Revenue excluding grants; minus current expenditure except interest due and except exceptional social expenditure.

Revenue excluding grants; minus current expenditure (excluding external interest), domestically-financed capital expenditure and net lending.

After rescheduling. On a disbursed basis, including arrears, rescheduling and new debt.

On a post HIPC basis and based on assumptions about expected new borrowing. HIPC assistance is assumed to be delivered unconditionally as of 1999. The exports denominator is calculated using a three-year back

Financing gap after taking into account identified financing expected during the course of the year.

Annex 2: Rwanda’s PSIA on the Optimal Fiscal Deficit

The PSIA in Rwanda emerged out of a difficult set of negotiations with the International Financial Institutions over Rwanda’s optimal fiscal deficit. Those supporting the constraining expenditure scenario now being implemented through the MTEF, are mainly concerned about the possibility of boosting expenditure to levels that could only be sustained by inflationary financing, if donor funding was reduced. Other reasons are the risk of increased indebtedness, a possible real exchange rate appreciation (Dutch Disease) and the negative effect this would have on trade competitiveness, the weak implementation capacity of government and the risks of expenditure going to non PRSP–priority areas.

The PSIA, however, argues that the optimal deficit depends on both the financing and the composition of expenditures and does not therefore give a single number for the optimum deficit, but rather, an approach to defining a prudent fiscal strategy. For grants, none of the macroeconomic arguments appears strong enough to warrant turning down free money. For loans, the critical judgement is the likely availability of funds in the future. The paper shows supporting evidence for the claim that it would be reasonably prudent to base a borrowing strategy on a significantly higher level of indebtedness than the ratio proposed under the HIPC initiative. As for the composition of expenditure, a distinction needs to be made between cost–incurring and cost–reducing measures. The most serious macroeconomic risk here is the bidding up of Government’s own costs (especially wages), reducing the real impact of extra public spending.

The current focus on the deficit excluding grants is unhelpful, as there needs to be flexibility to use grants as they become available. Under the current agreement, the IMF asks to save unexpected grants

The PSIA taught some lessons. First, the process of negotiation might benefit from the participation of a wider range of stakeholders. The IMF’s approval of macroeconomic programmes is effectively treated by some donors as a veto. Secondly, the government’s own capacity to engage in the debate needs to be reinforced by improved macroeconomic analysis and forecasting, specifically related to pro–poor growth. The simulations used in the macroeconomic model built for this paper, could definitely kickstart this process. Adapted from “The Impact of increases in public expenditure on poverty in Rwanda” (PSIA)

Annex 3. Budgetary Framework 2001–2005 and 2002 Budget Execution

(In billions of Rwandan francs)

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domestic revenue (excl. grants) minus current expenditure (excl. external interest), minus domestic capital, minus net lending

domestic revenue minus total expenditure (excluding debt and arrears)

current grants and loans not yet programmed for 2005

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Annex 4A: Ministerial Budget Execution

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Revised budget.

Base ordonnancements.

Salaries, goods and services, transfers and exceptional expenditure.

NOTE: For both 2002 and 2003, MINEDUC, MINISANTE and provinces budgets are completely covered by priority and exceptional expenditure.