Rwanda: End to Aid Freeze as Germany Resumes Aid?
Wednesday, 06 February 2013
Germany became the first country to reverse a development aid freeze to Rwanda pointing out that the country was ‘taking steps in the right direction.’ Whether this means a full resumption of funding is not yet clear: Reuters had indicated that only EUR7mn would be released, according to a spokesman of the German Federal Ministry for Economic Cooperation and Development. Rwanda’s New Times , in contrast, reported the resumption of the full EUR21m, quoting the German envoy who, however, indicated that the official word would come from Berlin. Most likely, Germany will still want to maintain a means of exerting pressure on the Rwandan government until a more satisfactory situation has been achieved.

And Rwanda, previously a popular candidate for budget support, which gives the government a lot of leeway in how to spend donated funds, may generally face more scrutiny: Media reports indicate that aid may be resumed under more restrictive conditions, e.g. as sector support. The German envoy, while announcing that Germany would unfreeze its aid, said that the bilateral budget aid will be converted to programme aid.

Rwanda has vehemently denied the allegations that it was backing M23 rebels in eastern Congo with President Kagame describing the accusations as mere fabrications. The rebels briefly took over the eastern DRC city of Goma, but agreed to a unilateral ceasefire as they engage the DRC government in peace talks in neighbouring Uganda (which had also come under scrutiny for its involvement across the border).

Germany joined other western countries like the UK, Sweden, US and Netherlands in freezing aid to a country that had long been popular with donors. Rwanda had denounced these moves, but aid still contributes around 40% of the budget, which will be difficult to offset even with the efforts to set up a diaspora fund and the introduction of austerity measures. The East African reported that the government had resorted to a hiring freeze as part of wider spending cuts with retrenchments not ruled out in case the freeze continuing for long. In December 2012, Finance Minister John Rwangombwa warned that the country’s 2013 economic growth forecast could drop to 6% from 7.6% if the aid remained suspended.

The government is employing several strategies to ensure the resumption of aid funding, with high level diplomatic talks among them, and has recently appeared more co-operative – possibly reflecting the growing financial pressure.

The Rwandan government has been very adept in managing its international relations and external PR, stifling any criticism of its governance. However, with this latest intervention in eastern DRC – where it long had a commercial and security footprint -, the country appears to have overreached itself. It would be difficult for donors to condone Rwanda’s logistical and financial support to an armed rebel army, but the situation also highlights the difficulties of donor nations: Rwanda’s involvement in DRC is, fundamentally, nothing new. At the same time, donor nations and the UN have had little to offer to improve stability and security in the DRC’s east. And aid freezes will always leave donor countries open to the accusation of punishing a country’s poorest citizens.

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