AID EFFECTIVENESS IN RWANDA: WHO BENEFITS? L SOCIET IVI Y P C LA A T D F N O A R W M R R C S P August 2012 AID EFFECTIVENESS IN RWANDA: WHO BENEFITS? August 2012 Pamela Abbott and John Rwirahira IPAR-Rwanda Aid Effectiveness in Rwanda:Who Benefits? 1 August 2012 Aid Effectiveness in Rwanda: Who Benefits? Institute of Policy Analysis and Research - Rwanda Pamela Abbott and John Rwirahira August 2012 ©ActionAid Rwanda 2012 Aid Effectiveness in Rwanda: Who Benefits? 2 August 2012 IPAR Research Team Paul Kayira Team leader Adelite Murindangwe Team leader Clotilde Ingabire Team leader Lyne Nziza Team leader Aline Nabigazi Research assistant Augustin Risingizwa Research assistant Sam Rurangwa Research assistant Jean de Dieu Ntamushobora Research assistant Anne Mukarebero Research assistant Justin Rwema Research assistant Brian Corry Research assistant Acknowledgements We would like to thank the all the informants who provided us with information when we were conducting the research for this report: the Executive Secretaries in Nyanza, Bugesera, Rulindo and Karongi Districts; the VUP coordinators and Director of Planning in Nyanza District; VUP beneficiaries in Nyanza District; the District and Sector veterinaries in Karongi Districts; the Ubudehe coordinators in Bugesera District; Ubudehe beneficiaries in Bugesera District; sex workers in Nyanza and Bugesera Districts; the A.V.E.H-Umurerwa Association in Bugesera District; one cow per poor family(Girinka) beneficiaries in Karongi District; and community health workers in Rulindo District. We would also like to acknowledge the support of our colleagues at IPAR-Rwanda. They made doing the research possible. We would like to especially acknowledge Brian Corry, research intern at IPAR for proof reading the final version of this report. This report has benefitted from feedback on an earlier vision from ActionAid Rwanda and the Rwanda Civil Society Platform. However, we alone remain responsible for the content of the report and it does not necessarily reflect the views of the Board of Directors of IPAR-Rwanda, ActionAid Rwanda or the Rwanda Civil Society Platform. Aid Effectiveness in Rwanda:Who Benefits? 3 August 2012 Is Aid efficiently used to benefit women smallholder farmers? Aid Effectiveness in Rwanda: Who Benefits? 4 August 2012 Executive Summary Rwanda, one of the poorest and most aid dependent countries in the world, has made dramatic development progress since 2006 and is now on track to achieve most MDG targets by 2015. Its development strategy has fuelled economic growth and transformation, reduced dependency on aid and insured that the poor have benefitted from economic growth. It remains, however, the fifth most aid dependent country in the world and is likely to remain aid dependent in the medium term. Poverty levels and economic inequalities remain high, and reducing poverty and providing decent employment remain challenges. Despite strong economic growth the tax base remains shallow and narrow, with only 11 percent of enterprises registered with the Rwanda Revenue Authority and only 25 per cent of workers in non-farm work. Domestic savings rates are low with only a fifth of adults having a savings account with most saving to manage short term fluctuations in spending and/or risk avoidance. Attracting foreign direct investment is proving challenging and with investment well below the levels being attracted to Uganda and Tanzania. Despite growing exports there has been a worsening balance of trade with the trade deficit widening by 40 percent between 2010 and 2011. Non-farm employment growth, with a growth rate of six percentage points between 2005/6 and 2010/11, needs to be accelerated to meet the numbers of new labour market entrants expected over the next 10 years. There is a need to continue to mainstream gender and introduce gender based budgeting and to fight HIV/AIDS where the infection rate of three per cent has remained stagnated in recent years.. The development progress under EDPRS-1 has undoubtedly been driven by a strong and determined Government supported by committed DPs. One clear indicator of this is the increase in ODA to help meet the cost of implementing the strategy. Strong country ownership and leadership of the development agenda, combined with community participation and supportive DPs has brought about genuine and sustainable progress, even in one of the poorest countries and without full commitment to the aid effectiveness agenda by DPs. As Rwanda reviews its progress under EDPRS-1, it is appropriate to review the effectiveness of development aid, the role it has played in prompting sustainable economic growth and transformation as well as reducing poverty and inequality. A key question is the extent to which development aid is being invested to do itself out of a job. We can also ask if aid is being delivered in the most effective and efficient way. Is it providing good value for money and is it being invested to support the Government’s development agenda? Are there ways in which it could be delivered more effectively and efficiently and potentially support even more development progress under EDPRS-2? Are development partners implementing their commitments to the Paris Declaration? Aid flows have continued to increase, although aid dependency (proportion of Government budget from development aid) has declined from 86 per cent in 2000 to 43 per cent in 2011/12. The Government has taken strong ownership of development support, skilfully taking up DAC DP’s rhetoric to exert leverage and bring its negotiating capital into play. The 2006 Aid Policy clearly incorporates and goes beyond the Paris Agenda. Rwanda was one of only two countries to be awarded an A grade in the OECD 2010 evaluation of the implementation of the Paris Agenda.The use of EDPRS as the framework for the allocation of resources,including development aid, has not only provided a useful guiding principle,but has also undoubtedly made a significant contribution to the achievement of results. It has ensured that aid is allocated to productive as well as social sectors, thus fuelling sustainable development and building human capacity as well as enabling the poorest and most vulnerable to exit poverty. There is evidence that DPs give assistance in line with EDPRS priorities even if the assistance is not always provided in the way the Government would prefer. Thus much development aid in Rwanda is ‘real aid’, aid that is it helping to fuel a virtuous spiral of development that is benefitting all Rwandans. However, challenges remain and some ODP’s and all other DPs are failing to fully engage with the aid effectiveness agenda and honour the commitments they made in Paris and renewed in Accra and Busan. Greater engagement with the agenda would undoubtedly permit even greater progress to be achieved under EDPRS-2 and ensure the efficient and most effective use of funds. In 2009/10 and 2010/11 most ODPs failed to meet their targets for performance. Indeed there was no sign of progress between the two years with an aggregate score in 2009/10 of 59.3 per cent and in 2010/11 57.9 per cent. However, in both years the average concealed a wide variation in performance between DPs with DfID the top scorer in both years scoring 100 per cent in 20109/10 and 86.4 per cent in 2010/11. The US, the poorest performer in both years, scored 23.5 per cent in 2009/10 and 13.3 per cent in 2010/11. DfID, the EC and the World Bank were in the top three in both years, whereas Japan and the US were the bottom two both years, with little movement of other DPs. What is evident is that there is much room for improvement on alignment, harmonisation and aid predictability. Aid Effectiveness in Rwanda:Who Benefits? 5 August 2012 Although the major DPs participate in the performance assessment not all ODPs do so, none of the non-DAC development partners participate. Non-participation raises questions about the extent to which these DPs are providing funding in line with the country’s development agenda.Tied aid and technical assistance from non- DAC DPs are less likely to raise issues of value-for-money but do raise the other concerns about TA and tied aid. The Government has undertaken a number of reforms and other initiatives to facilitate implementation of the Aid Policy, including reforming the public financial system so that it complies with international good practice, enabling DPs to have confidence in using the systems. Sector Wide Approach agreements have been signed with DPs in seven sectors and a division of labour agreed to ensure that development aid meets the needs of all sectors. These developments should reduce transaction costs and fragmentation. The establishment of a Single Project Implementation Unit in each Ministry will reduce the costs of aid delivery and give the Government greater ownership. The Project Treasury Single Account will facilitate the provision to Government of timely information on ODA flows. An Access to Information Law is expected to be placed on the statue book later in 2012. Aid predictability remains a problem hindering Government planning as well as policy and project implementation. Four DPs make no advance indications of and/or commitments to future volume of aid, including two of the largest donors the US and the Global Fund, together with Japan and Switzerland. Belgium, EC and the World Bank were the only DPs to met the 2010/11 target for percentage of ODA delivered in the year for which it was intended. Canada disbursed none and Japan only 10 per cent. Transparency remains a problem,with DPs failing to meet the deadlines for fully reporting ODA for the Government sector in time for it to be included in the Budget,This has reduced the ability of Parliament to scrutinise public spending, restricting the public availability of information.