RWANDAN ECONOMY AND FOREIGN AID

RWANDAN ECONOMY AND FOREIGN AID

In this chapter, I shall first outline the situation of the Rwandan economy in general and the
scope of international development assistance to the country, including the strings attached to
the aid.
The Economy in General
Rwanda is generally an extremely poor country with few natural resources and little industrial
production. The average life expectancy is only 40.5 years.1 For 1999, Rwandan GDP is
estimated to have been Rwfr 641.0 billion, or US$ 1.92 million, and Rwfr 712.2 billion for 2000, or
US$ 1.83 million. The real change in Rwandan GDP is estimated by the Economist Intelligence
Unit to have been 5.3% for 1999. In 1999, annual per capita income was US$ 189.2
Debt servicing has since 1994 been a major cause for a balance-of-payments deficit, but the
most recent figures available seem even more aggravating. Based on IMF, World Bank, and
national data, the Economist Intelligence Unit estimates the latest available debt figures as
follows: the total debt had risen to US$ 1.3 billion in 1999, and debt servicing to US$ 48.2 million,
representing 69% of the value of the US$ 70.8 million merchandise exports.3
Foreign investments account for more than 90% of total gross fixed investments, and due to
the huge inflow of hard currency from donors, the Rwandan Franc has been reasonably stable
despite the low exports.4
There is a huge economic and social divide between the countryside and the urban areas.
Economically, commercially, as well as seen from a wider developmental point of view, the urban
areas – in particular the capital Kigali – are far better off in all respects.
1 André, Catherine, and Luzolele Lola, Laurent, The European Union's Aid Policy Towards Countries involved in the
Congo: Lever for Peace of Incitement to War?, Unpublished paper, May 2001, p. 26
2 International Monetary Fund, Rwanda: Statistical Appendix, Country Report No. 01/30, 5 February 2001, at
http://www.imf.org/external/pubs/ft/scr/2001/cr0130.pdf, p. 3
3 Economist Intelligence Unit, EIU Country Profile 2000…, unpaginated version; and Economist Intelligence Unit, EIU
Country Profile 2001…, p. 28
4 Confer 'Table 7 – Rwanda: Selected Economic Indicators'; and Economist Intelligence Unit, EIU Country Profile
2001…, p. 19
89
According to the Economist Intelligence Unit, Kigali is thus "home to 94% of Rwanda's
banks, 96% of its industry, 65% of the civil service, 80% of the informal sector and 90% of the
hotel space. The city also has the most reliable supplies of water, electricity and telephone
lines."5
There are roughly 60,000 telephone lines in Rwanda, of which 90% are in Kigali. The
national telecommunications company, Rwandatel, is slated for privatization in 2001 with 51%
being offered to a strategic investor. MTN Rwandacell operates cellular phone services for some
20,000 subscribers. There are only about 2,000 Internet subscribers.6
In the countryside, most people are farmers. About 90% of the Rwandan work force is
employed in the agricultural sector, and the productivity in this sector is generally low. Agricultural
production collapsed with the Genocide in 1994 and only started to recover two years later,
although much of the improvement is because more areas are being cultivated.7
Also, the south-western part of the country has experienced drought and famine. Formal and
informal unemployment is widespread all over the country, which is reflected in the fact that an
estimated 70% of the population lives below the poverty line, and the vast majority of this group
are from the countryside.8
Table 1 – Rwanda: Selected Economic Indicators
1996 1997 1998 1999
(estimates)
2000
(forecasts)
GDP at market prices - in Rwfr billion 431.1 562.5 631.7 641 712.2
Real GDP 15.8 12.8 9.5 6.1 5.8
Average consumer price inflation 9.0% 7.4% 4.0% -2.4% 4.0%
Exports fob – in US$ million 61.7 93.2 64.5 62.3 68.4
Imports fob – in US$ million 218.5 278.2 234 224.5 245.9
Source:
Economist Intelligence Unit, Country Report Rwanda, 1 February 2001, unpaginated version
5 Economist Intelligence Unit, EIU Country Profile 2000…, unpaginated version
6 Economist Intelligence Unit, EIU Country Profile 2001…, pp. 17-18
7 Economist Intelligence Unit, EIU Country Profile 2000…, unpaginated version
8 Ibid.
90
Tea and coffee are the main export items, comprising 80% of the value of total exports in 2000.9
Rwanda earned US$ 68.4 million from exports in 2000, up by US$ 7.2 million from 1999, in spite
of a drop of nearly US$ 4 million in the value of its main export, coffee. Tea accounted for this
improvement, since tea exports were US$ 8.5 million higher in 2000 than in 1999 because of
increased production.10 However, imports reached US$ 245.9 million in 2000 and thus by far
outweighed exports, and the balance of payments situation has not eased in the last few years.11
Little hope is in sight in this regard, since Rwanda's export capacity and ability to attract foreign
investment capital is generally regarded as low and likely to remain so for at least a decade.12
Private and public transfers, which in 1999 covered 64% of the current deficit, are also
diminishing.13 As a result, the balance of payment deficit in 1999 went beyond US$ 100 million for
the first time after 1994 took power and the trend is forecast by the IMF to continue. 14
Catherine André therefore argues that the balance of payment deficit can either be financed
by jeopar dizing the stable monetary policy, i.e. accepting inflation, or by external means:
Ce solde négatif devra etre couvert soit par les moyens propres du Rwanda
[…] mettant en danger l'equilibre monetaire du pays ou par des
financements exterieurs sous forme de dons ou d'emprunts
supplementaires.15
It is worth mentioning that Rwanda currently has sufficient foreign reserves to match imports at
the current level for more than 10 months.
Official Development Assistance
I shall use the OECD's generally accepted definition of official development assistance (ODA),
which is defined as grants and loans with at least a 25% grant element, provided by OECD and
OPEC member countries and multilateral agencies, and which are administered with the aim of
9 Economist Intelligence Unit, EIU Country Profile 2001…, p. 19
10 Economist Intelligence Unit, EIU Country Profile 2001…, pp. 26-27
11 Confer 'Table 7 – Rwanda: Selected Economic Indicators''
12 André, Catherine, and Tierens, Michel, 'Les Limites Structurelles de L'Economie Rwandaise Face aux Reformes
Economiques et a L'integration Regionale', in Reyntjens, Filip, and Marysse, Stefaan, eds., L'Afrique des Grands Lacs.
Annuaire 1999-2000 (Paris: L'Harmattan, 2000), p. 68
13 Ibid., p. 73
14 Ibid., p. 68
15 Ibid., p. 68
91
supporting development and welfare in the recipient country.16 It is important to stress that the
OECD definition of ODA does not include military assistance.
Donors view aid as having a positive effect on both economic development and the political
level. Economically, in particular the Bretton Woods Institutions argue that a structural adjustment
programme, including a slimming of the public administration, privatization of public companies
and a reduction in military spending, will benefit the economy as a whole and thereby also the
poor people in Rwanda. Politically, donors argue that the economic reforms are an essential
element to stabilize the socio-political environment in Rwanda and the Great Lakes Region. 17 In
other words, aid is seen as a means to bring lasting pea ce to the region. The exact process is
hardly ever defined, but the argument seems to be that 'fat cats don't fight'; the wealthier the
people are, the more unlikely are wars.18 This is apparently why Rwanda is treated as a 'special
case' by international institutions, such as the World Bank and the IMF, and provided with critical
loans although they do not live up to IMF criteria.19 The United States and the United Kingdom
also support this view and give quasi-unconditional aid towards the budget and the external
balance.20 The EU has followed the line set out by the Bretton Woods institutions and is a major
donor of development aid, despite official protests against the continued war in the Congo. For
instance, the European Commission in June 1999 issued a communication to the EU Council of
Ministers and the EU Parliament reviewing the EU's economic cooperation with countries at war
in the Congo. The report was intended to avoid the misuse of development funds, provided by
the EU, for military purposes.21 However that may be, the EU has – long after the
16 Organisation for Economic Cooperation and Development, Development Co-operation Directorate, DAC Statistical
Reporting Directives, 2000, at http://www1.oecd.org/dac/htm/dacdir.htm , pp. 9-13, p. 31 and p. 71
17 See for instance International Development Asociation, Rwanda: Economic Recovery Credit, Washington, 9 March
1999, p. 18
18 This was for instance the conclusion in a report by the Center for War and Peace Research in Uppsala, Sweden.
Radio Free Europe & Radio Liberty, Swedish Report Emphasizes Role Of Poverty In War , News Article, 20 June 2000,
at http://www.rferl.org/nca/features/2000/06/F.RU.000620135251.html
19 See International Development Association, Rwanda: Country Assistance Strategy - Progress Report, IDA/R99-135,
11 June 1999 and section 'Donors and the 'Government of Rwanda' Agree on Lenient Conditions '
20 André, Catherine, and Tierens, Michel, 'Role de L'aide dans la Relance et la Stabilite Economique de Procedure du
Rwanda', in Reyntjens, Filip, and Marys se, Stefaan, eds., L'Afrique des Grands Lacs. Annuaire 1998-1999 (Paris:
L'Harmattan, 1999), p. 94
21 Also in June 1999, a presidential declaration expressed concern at the continuing flow of arms and military
equipment to the Great Lakes and Central Africa regions. The statement called on member states to strictly adhere to
the EU's own Code of Conduct on Arms Exports, and recalled that, under the EU code, countries agree not to
authorize arms exports that might "aggravate existing tensions or armed conflicts in the country of final destination" or
fuel human rights abuses. Human Rights Watch, 'Eastern Congo Ravaged…', also available at
http://www.hrw.org/reports/2000/drc/Drc005.htm#TopOfPage, unpaginated version
92
commencement of the Congo War - disbursed massive amounts of aid, including budget support
to the ministries of education, health and justice, as well as debt relief.22
Table 2 – Net Official Development Assistance to Rwanda
Grants and loans with at least a 25% grant element - disbursements minus repayments
All units in US$ million
1995 1996 1997 1998 1999
Bilateral 339.2 252 178.7 209 180.5
of which:
US 101 10 9 23 39.8
UK 34.5 19.3 10 20.6 26.5
Belgium 13.9 31.3 21 23 20.9
Netherlands 46.7 41.1 29.2 29 20.3
Germany 52.1 45.6 26 20.6 18.8
Multilateral 363.1 213.3 50.4 140.9 192.4
of which:
IDA 29 38.1 47.5 61.6 63.5
EU 17.9 55.4 46 26.7 39.1
WFP 150.7 80.7 -69.8 4.6 34
IMF 0 -1.3 -2.5 13.7 26.8
UNDP 5.1 5.1 10.5 9.7 12.2
Total 702 466.5 229.6 349.9 372.9
Of which:
Grants 662.6 423.9 181.5 260.4 287.4
Source:
Organisation for Economic Cooperation and Development, Geographical Distribution of Financial Flows to
Aid Recipients: 1995/1999 (Paris: Organisation for Economic Cooperation and Development, 2001), pp.
216-217
Note: Organisation for Economic Cooperation and Development data is not necessarily comp lete. The
Organisation for Economic Cooperation and Development caution that donors are not always accurately
reporting aid flows to non -governmental organizations working in Third World countries. Telephone interview
with Organisation for Economic Cooperation and Development official, June 2001
22 Confer the next chapter, 'Foreign Aid and the War Effort
93
Much of Rwanda's debt servicing is, at present, paid for by a donor trust fund. Debt relief
granted under the IMF and the World Bank's Highly Indebted Poor Countries (HIPC) initiative is
planned to reduce debt servicing to US$ 35 million per year in 2001 – if donors follow the
recommendations of the Bretton Woods institutions as of late December 2000.23
As can be seen in Table 8, Table 9, and Table 10, Rwanda is generally highly dependent on aid
in virtually all sectors. For instance, the country received US$ 372.9 million in Official
Development Assistance (ODA) during 1999, most of which (287.4 mil US$) comprised grants
provided by bilateral donors. However, net foreign assistance has been declining and is unlikely
to exceed US$ 180 million in 2001 and US$ 170 million in 2002, according to the Economist
Intelligence Unit, partly due to the Rwandan presence in the Congo and partly due to the
termination of the 'emergency period' following the 1994 Genocide.24
The impact that the foreign aid has on the 'Government's' budget is no doubt significant
although accurate information on the financial operations of the 'Rwandan Government' is difficult
to come by. One of the reasons for this is the discrepancy between the figures provided by the
IMF and those provided by the 'Government of Rwanda'. For 1999, the latest year for which the
most comprehensive data is available, the IMF claims that the 'Government's' total expenditures
were Rwfr 127.5 billion, or US$ 382 million, while the Rwandan Ministry of Finance lists Rwfr
150.6 billion, or US$ 451 million. As can be seen in Table 9 and Table 10, there is also a
difference on the amount of the 'Government's' budget covered by loans and grants from foreign
donors: 49% according to the IMF and 55% according to the Rwandan Ministry of Finance.
Likewise, It is unclear how many of these funds have been provided as direct budget
support. According to the UN Exploitation Panel Report, foreign budget support "has steadily
increased, from $26.1 million in 1997 to $51.5 in 1999".25 The IMF, however, estimates that
Rwanda received direct budget aid worth US$ 44.7 million in 1999.26 The direct budget support
was mainly provided by the EU and the United Kingdom.27
23 Economist Intelligence Unit, EIU Country Profile 2001…, p.28
24 Economist Intelligence Unit, Country Report Rwanda, 1 February 2001, unpaginated version
25 United Nations, Security Council, Report of the Panel of Experts…, at
http://www.un.org/News/dh/latest/drcongo.htm, p. 38
26 International Monetary Fund, Rwanda: Statistical Appendix, Country Report No. 01/30, 5 February 2001, at
http://www.imf.org/external/pubs/ft/scr/2001/cr0130.pdf, p. 32
27 United Kingdom, Department for International Development, Building support for Rwandas development, Press
Release, 26 September 2000, also available at http://www.dfid.gov.uk/public/news/pr26sept00b.html
94
Table 3 – Financial Operations of the Central 'Government of Rwanda' - 1999
Source: 'Government of Rwanda'
Rwfr million US$ million
Fiscal receipts 71,000 212.6
Non-fiscal receipts 3,500 10.5
Total revenue 74,500 223.1
Current expenditures 93,620 280.4
Capital expenditures(domestically financed) 5,000 15.0
Capital expe nditures(externally financed) 46,200 138.4
Arrears payments (domestic) 5,700 17.1
Total expenditures 150,620 451.1
Overall balance incl. Others -79,620 -238.5
Financing 79,620 238.5
Loans 30,611 91.7
Grants 51,511 154.3
Domestic financing -2,502 -7.5
Foreign Loans and Grants
as part of Total Expenditures 55%
Source: Rwandan Ministry of Finance quoted in Economist Intelligence Unit, EIU Country Profile 2000: Rwanda Burundi (London:
Economist Intelligence Unit, 2000), unpaginated version
95
Table 4 – Financial Operations of the Central 'Government of Rwanda' – 1998-2004
Source: International Monetary Fund
1998 1999 2000 2001 2002 2003 2004
(estimates) (budgeted) (projections) (projections) (projections)
Current Expenditures - in Rwfr billion 75.3 87.1 86.7 96.4 101.1 109.7 120.3
Total Expenditures - in Rwfr billion 117.4 127.5 134.4 153.3 166.8 183.5 201.2
Net Foreign Financing - Grants 33.0 38.6 26.1 35.2 39.4 46.8 51.3
Net Foreign Financing - Loans 39.2 24.5 11.0 10.2 17.2 19.4 21.4
Net Foreign Grants and Loans as part
Of Total Expenditures 61% 49% 28% 30% 34% 36% 36%
Source:
International Monetary Fund, African Department, Rwanda-Staff Report for the 2000 Article IV Consultation
and Requests for the Third Annual Arrangement Under the Poverty Reduction and Growth Facility
and for Extension of Commitment Period, 11 December 2000, p. 37
(*) A projected exchange rate of Rwfr:US$ 430.0 was used for 2001
Source: Economist Intelligence Unit, Country Report Rwanda, 1 February 2001
96
'Donor-Imposed' Conditions
When pledging aid, donors usually agree on a set of principles with the recipient country. These
usually include more or less specified promises from the recipient government to work for
democracy, curb corruption, increase social expenditures, minimize military expenses etc.28
Usually such promises – or indeed conditions for receiving aid - are written down in declarations
addressed to the World Bank and/or the IMF. At other times, donors simply declare that
continued support depends on the recipient government's adherence to such and such criteria.29
Donors and the 'Government of Rwanda' Agree on Lenient Conditions
Rwanda has been no exception in this regard. Donors have time and again stressed that
continued aid is tied to both political conditions, for instance the respect of the Lusaka Accords,
i.e. the withdrawal of Rwandan troops from the Congo as well as other issues, such as
democratic progress, respect for human rights and what is loosely termed 'good governance'.30
In addition, donors also demand that Rwanda adheres to certain macroeconomic criteria,
such as a minimum of net foreign assets in the National Bank of Rwanda, privatizations, and not
least cutbacks in military expenditures.31 The economic criteria are primarily imposed by the IMF
and the World Bank, though the issue of military expenditures is continuously mentioned by all
donors. For instance, during his March 2000 visit to Rwanda, the EU Commissioner for
Development and Humanitarian Aid, Poul Nielson, asked the 'Rwandan Government' to mind its
military expenditures.32 At a major donor conference in November 2000, several influential donor
countries reiterated concerns of the Rwandan presence in the Congo and stressed that further
28 See for instance Kanbur, Ravi, 'Aid, conditionality and debt in Africa', in Tarp, Finn, and Hjertholm, Peter, eds.,
Foreign Aid and Development: Lessons Learnt and Directions for the Future (London: Routledge, 2000), pp. 409-422
29 See for instance East African, 'Trim Spending or Risk Aid Cut, Kigali Told', 13 November 2000, also available at
http://www.nationaudio.com/News/EastAfrican/19112000/Regional/Regional15.html
30 See for instance the memorandum of understand signed by Paul Kagame and Claire Short on 12 April 1999,
reprinted in United Kingdom, Department for International Development, Rwanda: Country Strategy Paper 1999,
September 1999, also available at http://www.dfid.gov.uk/public/what/strategy_papers/rwanda_csp.html, pp. 9-12
31 See for instance See for instance East African, 'Trim Spending or Risk Aid Cut, Kigali Told', 13 November 2000, also
available at http://www.nationaudio.com/News/EastAfrican/19112000/Regional/Regional15.html; United Kingdom,
Department for International Development, Rwanda: Country Strategy…, at
http://www.dfid.gov.uk/public/what/strategy_papers/rwanda_csp.html; International Monetary Fund, African
Departement, Rwanda: Midterm Review under the First Annual Arrangement Under the Enhance Structural Adjustment
Facility and Request for Waiver of Nonobservance of Performance Criteria, 26 February 1998; and International
Monetary Fund, Rwanda – Midterm Review Under the First Annual Arrangement Under the Enhanced Structural
Adjustment Facility and Request for Waiver of Nonobservance of Performance Criteria, EBS/99/22, 26 February 1999
32 United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information Network for
Central and Eastern Africa (IRIN -CEA), 'Rwanda: EU restores development cooperation', 10 March 2000, at
http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20000310.htm
97
cuts in military expenditures were necessary to ensure continued donor support.33 In a statement
from early 2001, the IMF directors stressed that they 'expected' military spending to be shifted
more and more towards social areas "as efforts to promote peace in the region advanced". In
fact, hardly any donor meeting goes by without donors asking Rwanda to decrease its military
expenditures.34
With reference to the Genocide, donors have been extremely lenient toward the
'Government of Rwanda', claiming that the latter needs more aid, fewer conditions, and more
patience from donors. A discourse largely invented by the 'Government of Rwanda', but accepted
at face value by most donors. The discourse of 'recovery from Genocide' has been successfully
introduced by the 'Government of Rwanda' and used gratefully by donors to explain why Rwanda
should have just a little more time and be given just a little more rope before it could meet the
criteria that are normally imposed on other African countries in return for development assistance
at a much earlier stage. 35
This argument has been used not only to legitimize political moves, such as the
postponement of elections, the postponement of withdrawal from the Congo, the massive
abuses, etc., but also to legitimize the necessity of maintaining higher military expenditures in
order to come to terms with the former genocidaires. When the 'Government of Rwanda'
negotiated with the IMF and the World Bank for structural adjustment loans and access to the
HIPC Initiative, the Bank and the Fund accepted that the proportion of GDP spent on the military
would for years remain higher than was normally the case under structural adjustment
33 East African, 'Trim Spending or Risk Aid Cut, Kigali Told', 13 November 2000; and World Bank, External Affairs
Department, Development News, 9 November 2000, at
http://wbln0018.worldbank.org/NEWS/DEVNEWS.NSF/eb730c645da440418525673500723bf3/9f3ffe649923ece18525
6992004f6342?OpenDocument; and United Nations, Office for the Coordination of Humanitarian Affairs, Integrated
Regional Information Network for Central and Eastern Africa (IRIN -CEA), 'Rwanda: Donors urge pullout from DRC', 9
November 2000,at http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20001109.phtml
34 André, Catherine, and Luzolele Lola, Laurent, The European Union's Aid Policy Towards Countries involved in the
Congo: Lever for Peace of Incitement to War?, Unpublished paper, May 2001, p. 16. See also statements quoted in
Amnesty International, Democratic Republic of Congo: Rwandese-controlled east: Devastating human toll, 19 June
2001, Report No. AFR 62/011/2001, at
http://web.amnesty.org/ai.nsf/Index/AFR620112001?OpenDocument&of=COUNTRIES%5CRWANDA, unpaginated
version, footnote 11
35 For instance, the UK's Department for International Development (DFID) wrote in a memorandum that the
"Government of the United Kingdom […] believes that Rwanda should be treated as a special case for international
assistance." United Kingdom, Department for International Development, Rwanda: Country Strategy Paper…, at
http://www.dfid.gov.uk/public/what/strategy_papers/rwanda_csp.html, p. 9. On 7 April 1998, the World Bank Board of
Directors "endorsed the CAS [Country Assistance Strategy] proposal that Rwanda be treated as a special case for
international assistance and given exceptional assistance to overcome the legacies of the genocide and make the
transition to peace and development." International Develo pment Association, Rwanda: Country Assistance Strategy -
Progress Report, IDA/R99-135, 11 June 1999
98
programmes. For several years, Rwanda was allowed to have military expenditures of
approximately 4% of GDP.36
Conditions are Violated by the 'Government of Rwanda'
In 1998, several budgetary requirements were not met. The official military budget - excluding
extra-budgetary revenue - was exceeded by 0.4% of GDP, there was underspending on basic
social services, an end-September 1998 performance criteria deadline on net foreign assets of
the National Bank of Rwanda was not met, while the repayment of domestic arrears owed by the
'government' had been delayed. A deadline for submitting certain legislative proposals to
parliament had also not been met, and an audit of the national telephone company Rwandatel
was carried out several months too late. 37
…. but Donors either Waive the Conditions…
But when the 'Government of Rwanda' did not meet these criteria, in particular with respect to
staying with the record-high allowance for military expenditures, it faced no consequences. The
IMF response was to agree to a request by the 'government' for waiving these criteria arguing
that the financial targets "were broadly met" and that the 'government' maintained a 'strong
commitment' to the programme.38 Three years later, in late March 2001, the IMF Board of
Directors "expressed concern over the extra-budgetary expenditures, especially those relating to
military spending", though no amounts or estimates were mentioned. Again, the 'Government of
Rwanda' faced no consequences, but the IMF Board of Directors merely "welcomed the
authorities' intention to bring them into the 2002 budget".39
…. Turn a Blind Eye on Violations …
The Bretton Woods institutions have failed to investigate how minerals exploited from Congo
fund the Rwandan military outside the recorded budget. And this despite a recorded export of
various minerals that are either not mined in Rwanda or not in the quantities in which they are
exported, and despite the fact that the mineral exploitation in the Rwandan zone of Congo has
36 Confer 'Table 6 – Official Rwandan Military Expenditures'
37 International Monetary Fund, Rwanda – Midterm Review Under the First Annual Arrangement Under the Enhanced
Structural Adjustment Facility and Request for Waiver of Nonobservance of Performance Criteria, EBS/99/22, 26
February 1999, p. 3
38 Ibid.
99
been openly acknowledged by RCD-officials on a number of occasions.40 The establishment of a
handful of diamond comptoirs in Kigali has also not prompted any reaction by donors or Bretton
Woods officials.41
No political analysis and no thorough investigations seem to have been carried out by
neither the IMF nor the World Bank on this issue. In fact, several IMF sources acknowledge that
they do not see it as their job to find out whether revenue earned from the trading in precious
commodities funds the Congo campaign. One official thought it was 'anybody's guess' whether
exploitation was going on and whether this contributed to the RPA's warfare:
We are not able to police possible illegal exploitation from the Congo. We
can not exclude that resources are being taken away on an individual basis.
It is not the IMF's task to travel to Congo to find out about this […] The view
we have taken on [the level of] military activities is that it was the same
before and after the start of he war. We cannot exclude that natural
resources are financing additional activities. [But] It is not our task to find it
out. 42
The fact that the RPA's military expenditures has gone down after the war started following the
Congo, the IMF official said, was tied to the IMF's conviction that the RPA was only "assisting the
rebels". With respect to the level of military expenditures following the Rwandan invasion of
Congo in August 1998, the official said:
Our impression was that the military activities had been financed by the
government's own resources until '98, and that they continued to use their
own resources [for this purpose], which was 4 % of GDP. The bulk of
activities already took place […] Since the Rwandese army was there in the
area [in connection with the counter-insurgency campaign in North-Western
Rwanda], it was just displacing the activities across the border. There was
not a need for a massive increase in resources. 43
This statement seems a bit far-fetched for (at least) two reasons. First, the premise of the
calculation, namely that the RPA only 'assists' RCD-Goma is doubtful. The RPA is largely
39 International Monetary Fund, IMF Concludes Article IV Consultation with Rwanda, Public Information Notice (PIN)
No. 01/31, 27 March 2001, at http://www.imf.org/external/np/sec/pn/2001/pn0131.htm
40 Confer the above section 'Exports via Rwanda' and 'Table 2 – Official Rwandan Coltan Production and Export'
41 Lemarchand, René, The Democratic Republic of Congo: From Failed State to Statelessness, unpublished paper,
December 2000, p. 17; and Chicago Tribune, 'Torrents of civil war pound ravaged Congo: Nation of riches
impoverished by legacy of greed', 10 December 2000, also available at http://www.pulitzer.org/year/2001/international -
reporting/works/congo1.html
42 Confidential telephone interview with International Monetary Fund official, 2001
43 Ibid.
100
controlling RCD-Goma, which was created by the RPA only one day after the (re-)invasion on 1
August 1998. RCD-Goma, deeply resented by the local Congolese population, would be nothing
without the RPA, and this makes the line between RCD-Goma expenses and RPA expenses fluid
at best.
Second, it is simply not true that RPA activities have just been displaced across the border.
Rwandan troops are operating deep inside the jungle, hundreds of kilometers away from
Rwanda, in areas by and large only reachable by expensively chartered airplanes or through
army helicopters. Such transport of material and troops is bound to incur substantial extra
expenses compared to a situation in which the RPA stayed put inside the Rwandan borders.
Ammunition, the replacement of weapons lost in battle etc. also incur extra expenses.
Moreover, the Bretton Woods institutions seem not to have investigated extra-budgetary
financing through the so-called 'voluntary contributions', claiming there was no evidence of
people being forced to contribute and that any such contribution made had been disclosed to
donors.
Donors appear to have decided to refrain from investigating whether conditions are being
respected, instead quietly 'believing' in the good intentions of the Rwandan 'government', which
is, for instance, expressed in the following statements by a high-ranking World Bank economist,
Chukwuma Obidegwu, and a press release from the Dutch Foreign Ministry, respectively:44
The government of Rwanda assur ed us that it is not interested in the
continuation of the war – which is satisfactory to us […] We have no
guarantees but we have their word45
In a letter to [the Dutch Minister for Development Cooperation, Eveline]
Herfkens, President Kagame said that he was cooperating fully in
implementing the Lusaka peace agreement. This was enough to persuade
Ms Herfkens to include Rwanda on the list [of countries receiving bilateral
Dutch aid].46
44 See also File on Four, BBC Radio 4, 10 July 2001, transcript available at
http://www.bbc.co.uk/radio4/progs/genre/transcripts/fi leonfourmobilephones.pdf
45 Reuters, unnamed news article on IMF loan to Rwanda, 8 February 1999, quoted in Reyntjens, Filip, Talking or
Fighting…, p. 26
46 Netherlands, Ministry of Foreign Affairs, Development aid countries now "18+4", Press Release, n.d., at
http://www.minbuza.nl/english/Content.asp?key=310533&pad=257569,257774
101
…. or Accept Manipulated Figures
The Bretton Woods institutions have steadfastly backed questionable statistics put forward by the
'Government of Rwanda' and even continued to publish manipulated and incompatible figures by
the 'Government of Rwanda'. The clearest example of such incompatibility are the huge gold
exports to Belgium, worth US$ 35.5 million and US$ 29.8 million for 1997 and 1998, respectively.
These figures are totally incompatible with both the total Rwandan exports to Belgium, listed at
US$ 4 million for both years in question, as well as total Rwandan gold exports.47 According to
ex-RPA officer Deus Kagiraneza, he was approached by World Bank staff in Rwanda, who
already back in 1998 asked Kagiraneza to explain this gap. Kagiraneza, a former employee at
the Congo Desk, says he told the World Bank staff that he was not able to offer an explanation.48
But neither the World Bank nor the IMF have written a single line about this discrepancy in their
subsequent reports on Rwanda, which are used by virtually all other donors to evaluate the
economic progress of the country.
In Any Event, Aid Contributes to Development, Donors Say
To most donors, neither the extra-budgetary revenue nor the Congo war have as such prevented
the continuation of aid to Rwanda. Because aid, donors argue, contributes to development in
Rwanda. But the reasons for the continuation or expansion of aid to Rwanda have varied
considerably, though two concepts have always been at the center of discussions: progress on
the one hand and backwardness, or need, on the other.
Before 1994, donors used to emphasize Rwanda's economic progress and disbursed so
much aid that the country received one of the highest per capita rate of foreign aid in Africa.49
During and after the Genocide, both government donors and NGOs rapidly shifted the
discourse and emphasized the great need in Rwanda (as well as in Eastern Zaire).
Following enormous amounts of post-Genocide 'emergency aid' as it usually termed, donors
have the past few years stressed both progress and need in Rwanda. Some examples illustrate
this.
47 Confer 'Official Rwandan National Accounts and Export Statistics' and Economist Intelligence Unit, EIU Country
Profile 2001…, p. 27. The gold export is also inconsistent with the official total export for 1998, which was US$ 64.5
million, most of which was co ffee and tea, thus leaving only US$ 9.8 million USD for 'other products'. International
Monetary Fund, Rwanda: Statistical Appendix, Country Report No. 01/30, 5 February 2001, at
http://www.imf.org/external/pubs/ft/scr/2001/cr0130.pdf, p. 35
48 La Libre Belgique, 'A qui profite le coltan de l'est congolais?', 23 December 2000, and Telephone interview with ex-
Rwandan Patriotic Army officer, Deus Kagiraneza, June 2001
49 Prunier, Gèrard, The Rwanda Crisis…, first edition, p. 79
102
Progress has been lauded by donors in numerous statements. According to an IMF
statement, its executive board commended the Rwandan authorities for their "success in
maintaining macroeconomic stability with solid growth and low inflation […] This has provided the
basis for the completion of the review and a consolidation of Rwanda's good track record of
policy performance"50 In March 2000, the EU Commissioner for Development and Humanitarian
Aid, Poul Nielson, praised Rwanda's economic reform efforts when he signed an aid contract for
€ 110 million.51 Rwanda has also been performing well, according to a strategy paper prepared
by the UK's Department for International Development (DFID) in connection with the signing of a
UK£ 30 million aid donation: "[e]conomic progress has been made through a number of central
reforms in foreign exchange, fiscal, monetary and trade areas." 52 The Dutch Foreign Ministry also
emphasized the progress achieved by the 'Government of Rwanda' when the former decided to
put Rwanda on the list of countries receiving bilateral Dutch aid, setting aside NLG 50 million for
Rwanda in 2000: "Rwanda has made progress economically and in the area of governance,
which justifies further Dutch aid and a place on the country list."53
However, the same donors have also used backwardness to justify aid. The Government of
the United Kingdom has in its above-mentioned strategy paper argued that:
Rwanda is one of the poorest countries in the world. It is recovering from
tragic human and economic destruction (institutional and productive
capacity has been decimated) which has few parallels […] Capacity
constraints are acute and constrain efforts to improve Rwanda's public
sector management and the productivity and competitiveness of its private
sector. 54
An IMF team visiting Rwanda in January 2001 declared that great challenges remained in terms
of tackling the poverty situation, a theme also stressed at a major donor conference in Kigali
50 See also United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information
Network for Central and Eastern Africa (IRIN -CEA), 'Rwanda: Economic basic sound, poverty issues remain', 22
January 2001, at http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20010122.phtml
51 Irin United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information Network for
Central and Eastern Africa (IRIN -CEA), 'Commissioner calls for cut in military spending', 10 March 2000, at
http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20000310.htm ; and Economist Intelligence Unit, EIU Country
Profile 2000…, unpaginated version
52 United Kingdom, Department for International Development, Rwanda: Country Strategy…, at
http://www.dfid.gov.uk/public/what/strategy_papers/rwanda_csp.html, p. 3
53 Netherlands, Ministry of Foreign Affairs, Development aid countries now "18+4", Press Release, n.d., at
http://www.minbuza.nl/english/Content.asp?key=310533&pad=257569,257774
54 United Kingdom, Department for International Development, Rwanda: Country Strategy…, at
http://www.dfid.gov.uk/public/what/strategy_papers/rwanda_csp.html, p. 1
103
convened in November 2001 to discuss the eradication of poverty.55 After having signed the
above-mentioned € 110 million aid package, the EU Commissioner for Development and
Humanitarian Aid, Poul Nielson, said that additional EU money would be available to Rwanda "in
the light of the country's general situation and needs", thereby suggesting that the provision of aid
was tied to the backward situation in the country. 56
As demonstrated above, two opposite depictions of the situation in Rwanda - backwardness
and progress - have been used side-by-side to justify increased or sustained aid. For instance,
the DFID
…recognises that without substantial, sustained and flexible support from
the donor community it will not be possible for the Government [of Rwanda]
to manage the difficult transition from conflict to peace and stability and to
attain the sustainable growth necessary to reduce the extreme poverty of
the Rwandan people. 57
Without aid, the DFID argues, there will be no effective development. Aid must thus be given on
a 'flexible' basis and not tied to rigid criteria: The "move to sustainable growth requires a shift of
international financial support from humanitarian assistance to longer term, flexible and
sustainable support for development." Similarly, in connection with the release of funds to the
education sector, the UNDP stressed that such aid projects contributes to development in the
Rwanda. "Following the genocide, there is a very urgent need to rebuild human resources and I
believe that these projects are absolutely key to that process,"58 the UNDP resident
representative stated in 1999. In 2001, the (new) UNDP resident representative stated that the
"UNDP is proud to support these critical components that will help Rwanda move toward
55 United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information Network for
Central and Eastern Africa (IRIN -CEA), 'Rwanda: Economic basic sound, poverty issues remain', 22 January 2001, at
http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20010122.phtml
56 United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information Network for
Central and Eastern Africa (IRIN -CEA), 'Rwanda: EU restores development cooperation', 10 March 2000, at
http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20000310.htm
57 United Kingdom, Department for International Development, Rwanda: Country Strategy Paper…, at
http://www.dfid.gov.uk/public/what/strategy_papers/rwanda_csp.html, p. 9
58 United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information Network for
Central and Eastern Africa (IRIN -CEA), 'UN and other donors approve governance fund', 11 December 2000, at
http://stone.cidi.org/humanitarian/irin/ceafrica/00b/0028.html; and United Nations, Office for the Coordination of
Humanitarian Affairs, Integrated Regional Information Network for Central and Eastern Africa (IRIN -CEA), 'Rwanda:
$6.7 million pledge for education and civil service programmes', 24 August 1999, at
http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/19990824.htm
104
increased levels of sustainable human development".59 NGOs have also strongly backed the
view that aid contributes to development. For instance, Oxfam has argued that:
the debt problem, left unresolved, will contribute to wider pressures
endangering Rwanda's development prospects. Rwanda's debt burden is a
fundamental obstacle to the reconstruction and rehabilitation efforts of the
Rwandan Government and members of the international community.60
Thereby stressing the simultaneous progress, i.e. the 'rehabilitation efforts' of the 'Government of
Rwanda', as well as the great need and backwardness in Rwanda.
In short, donors claim that aid is bound to contribute to development in Rwanda: the
progress seems to imply that aid money will not go to waste, while backwardness or need implies
that money is spent on needy people. Donors thereby end in the circular logic that was
sarcastically lauded by Professor Peter T. Bauer of the London School of Economics:
Whatever happens in the recipient countries can be adduced to support the
maintenance or extension of aid. Progress is evidence of its efficiency and
so an argument for its expansion; lack of progress is evidence that the
dosage has been insufficient and must be increased. Some advocates
argue that it would be inexpedient to deny aid to the speedy (those who
advance); others, that it would be cruel to deny it to the needy (those who
stagnate). Aid is thus like champagne: in success you deserve it, in failure
you need it.61
The donors' perception of Rwanda fits this description quite well. I have come across no donor
statements implying that the absence or diminution of aid, let alone sanctions, would contribute to
development in Rwanda.
Provisional Conclusion
Rwanda is a very poor country with very few valuable exports, mainly tea and coffee, and imports
outweigh exports by a factor of nearly four. The country is extremely dependent on donor loans
59 United Nations, Office for the Coordination of Humanitarian Affairs, Integrated Regional Information Network for
Central and Eastern Africa (IRIN -CEA), 'Rwanda: UN and other donors approve governance fund', 11 December 2000,
at http://www.reliefweb.int/IRIN/cea/countrystories/rwanda/20001211.phtml
60 Oxfam, Debt relief for Rwanda: an opportunity for peace-building and reconstruction, Policy Paper, n.d., available at
http://www.caa.org.au/oxfam/advocacy/debt/rwanda/relief.html#section2
61 Bauer, Peter, Equality, The Third World and Economic Delusion (London: Weidenfeld & Nicolson, 1981), (no page
number provided), quoted in Hancock, Graham, Lords of poverty: The Free-wheeling Lifestyles, Power, Prestige and
Corruption of the Multi -Billion Dollar Aid Business (London: Macmillan, 1989), pp. xiv-xv
105
and grants, which finance roughly half of the government's budget. Despite the fact that the
'Government of Rwanda' has violated several important economic agreements with the Bretton
Woods institutions, inter alia by financing its military by precious commodities obtained under
cover of the war in the Congo, donors have nevertheless been unwilling to limit the aid to
Rwanda. Aid helps – regardless of the situation, donors say.