Can Rwanda Really Generate Its Own Funding?

22 Sep


Rwanda’s alleged involvement in the rebellion in eastern DRC has left the country a little underfinanced: Following the publication of the UN Security Council report citing evidence that Rwanda has armed, trained and supplied the so-called M23 rebels, several donors have suspended their budget support.

This may or may not be temporary – the UK has now released some funding after all, but it is clearly a cause for concern as the sums involved are not just symbolic. But donors are often very slow to pull financial strings. A good thing, you could argue: after all, budget and programme support are intended to help poor people, and if aid agencies pull funding at the drop of a hat, isn’t that a punishment mostly for the poor who are already vulnerable and left exposed by an incompetent government?

Of course it is a bit more complicated. For one, there’s an enormous amount of bureaucracy and long-term planning in bilateral and multilateral aid financing. And then there’s also the fact that aid agencies have their own objectives. Aid agencies become investments;  in jobs, project portfolios, and influence in the recipient country.

Also, withdrawing funding exposes them to questions why they had given money to such a government in the first place. At what point exactly do you admit that you might have been a bit naïve in your assessment of, say, Yoweri Museveni, who you called one of Africa’s new leaders back then?

When do you admit that the new leader is, in fact, looking suspiciously old-school and corrupt in his third decade in power? If you had done your homework on Uganda properly, you might have noticed this is quite some time ago. But typically, aid agencies do a bit of the pro-forma cutting back on aid funding before the elections, and then it’s back to business as usual. In the end, both depend on each other.

So back to Rwanda: Faced with significant budget cuts, the Rwandan government has set up the Agaciro Development Fund (AgDF), the ‘Dignity Development Fund’. The intention is to collect voluntary contributions from Rwandans living at home as well as in the diaspora to offset the loss of aid funding. Over the past month, the fund has collected nearly USD30m, from what I can see in media reports.

The practicalities may still be a bit hazy.  What the funds will be used for is supposed to be decided at a national dialogue later this year, but some of it will be invested in large scale projects that are supportive of development, and some of it will be parked in liquid assets for now, according to Minister of Finance and Planning John Rwangombwa.

But in principle, it is a great idea, I think. Why should Rwandans not be the first port of call for the financing for the development of their own country? I do hope that the Rwandan government will work out some modalities that will eventually turn this into a genuinely attractive proposition for Rwandans, not just a one-off donation that they might be pressured into giving.

Of course you can take this argument just a wee bit further and ask the question why this has not been done years ago. Dignity is important, but do you need to wait for a serious falling out with your international funders  to discover ‘dignity’? At the launch of the fund, President Paul Kagame said: ‘There are no people anywhere in the history of the world who progressed just by receiving assistance from others.

It’s like giving anesthetics to a patient – it relieves the pain, but it doesn’t cure the illness.  He may be right,  but that certainly hasn’t stopped him for accepting donor funding for 40% of Rwanda’s household for years. The big advantage of not relying on donor funds is that you then don’t need to take directions from aid agencies on how you should use their cash, and I think it’s perfectly  ok ay for aid agencies and donating governments to want some say in this.

The other question is what happens if the aid cuts are sustained. Although I think this is unlikely. Will the contributions from Rwandans be enough to sustain the budget year after year?

A short-term full transition from budget support to own resources is hugely challenging for donor dependent countries like Rwanda, Tanzania and Uganda, and broadening the tax base and attracting more investors can be difficult. Kagame is hedging his bets. ‘We are not changing the way we closely collaborate with our partners, but we are simply trying to add value to the collaboration. A good way to cohabitate with others implies upholding your dignity”.  So bring back aid?

Source: The Star


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