VZCZCXRO2853
PP RUEHRN
DE RUEHLGB #0122/01 0560855
ZNY CCCCC ZZH
P 250855Z FEB 10
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC PRIORITY 6670
INFO RUEHXR/RWANDA COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUZEFAA/HQ USAFRICOM STUTTGART GE
RUEHLMC/MILLENNIUM CHALLENGE CORP 0182
RUCNDT/USMISSION USUN NEW YORK 0365

C O N F I D E N T I A L SECTION 01 OF 03 KIGALI 000122 
 
SENSITIVE 
SIPDIS 
 
USAID FOR AFR/EA, AFR/DP, ODP/OD 
 
E.O. 12958: DECL: 2/25/2020 
TAGS: EAID EAGR EINV SOCI ECON KMCA RW
SUBJECT: RWANDA EAGER TO TAKE GREATER OWNERSHIP OF FOREIGN 
AID 
 
KIGALI 00000122  001.2 OF 003 
 
 
Classified By: CDA Anne Casper, reasons 1.4 (b) (d) 
 
¶1. (SBU) SUMMARY:  During a February 4-5 annual meeting with 
development partners to review progress and efforts to make 
aid more effective, the Government of Rwanda (GOR) proposed 
to limit the number of sectors in which each donor country 
works in order to reduce transaction costs and risks of 
duplication.   USG assistance specifically would be in the 
health, agriculture and employment/capacity-building sectors. 
 The target date for completing the discussions and reaching 
agreement on a division of labor is June 2010.  END SUMMARY. 
 
¶2.  (SBU) Finance Minister John Rwangombwa chaired the sixth 
annual GOR and development partner (DP) retreat on February 4 
and 5, with permanent secretaries from each government 
ministry attending.  Representatives from donor countries, 
multilaterals, international NGOs and local civil society 
attended. Each bilateral and multilateral partner reported on 
progress toward achieving self-selected targets set last 
year, which were based on the Paris Declaration of Aid 
Effectiveness indicators. The USG met its goals, which were 
to increase our assistance as part of the GOR's national 
budget annex and increase the percent of analyses undertaken 
by the USG jointly with other DPs. 
 
¶3. (SBU) GOR officials delivered presentations on reducing 
aid transaction costs, challenges and priorities for the 
government's development agenda and the global financial 
crisis impacts and prospects on Rwanda.  A key presentation 
was on the GOR's proposal on donors' division of labor, which 
will affect most donor country programs, including the U.S. 
The GOR intends to upload these presentations on its website 
at http://www.devpartners.gov.rw/. 
 
 
Division of Labor - Moving Beyond Just Talking 
--------------------------------------------- ------- 
 
¶4. (SBU) During the February 4-5 meeting, the GOR floated a 
concrete proposal to reduce each DP's future support to three 
sectors, down from an average of six, currently.  Of the 15 
sectors under the country's Economic Development and Poverty 
Reduction Strategy, it was proposed that the U.S. focus in 
health (with DFID and Belgium), agriculture (with Canada, 
Japan, African Development Bank, European Commission, and 
World Bank), and employment/capacity building (with Germany). 
 Other sectors currently financed with U.S. assistance 
include education, decentralization, justice, environment and 
water/sanitation.  (Comment: The GOR's push to take greater 
charge of assistance it receives from donor countries and 
non-government organizations continues unabated.  For some 
time now, Rwanda has expressed its clear preference for 
budget support (estimated at about 35 - 40 percent of total 
official development assistance), as opposed to project 
support which is the more common aid modality for the U.S. 
Such a division of 
 Labor, which would limit donors to fewer sectors, has been 
discussed over the past 18 months in Rwanda; for the first 
time, however, the GOR has made a specific proposal.  End 
Comment.) 
 
¶5. (SBU) Rwangombwa and his permanent secretary both 
emphasized that the Paris Declaration and the Accra Agenda 
for Action (2008) commit GOR and donors to enhance division 
of labor.  They believe that doing so will reduce their own 
transaction costs and donor overheads, reduce the risk of 
Qtransaction costs and donor overheads, reduce the risk of 
duplication, and improve the quality of program delivery 
through increased use of delegated cooperation and "silent" 
partnerships.  Exceptions to the proposed limited sectoral 
engagement by DPs included basket funding by some donors 
(e.g., Public Financial Management, statistics), emergency 
and regional assistance, and projects/programs under current 
strategies.  An expectation in limiting donors to three 
sectors was that total official development assistance would 
not fall, an assumption that was questioned by some including 
the U.S. delegation. 
 
 
Division of Labor - What Next? 
------------------------------ 
 
¶6. (SBU) The GOR proposed that each development partner 
consult with its respective headquarters, hold bilateral 
 
KIGALI 00000122  002.2 OF 003 
 
 
discussions with the Ministry of Finance, have another 
discussion in late March, and then finally complete the 
division of labor exercise by June 30, 2010. 
 
 
Development Progress and Priorities 
----------------------------------- 
 
¶7. (SBU) Rwanda's determination to take charge of its 
development agenda results in part from the rapid progress it 
has made in most sectors.  The GOR has met or exceeded 80 
percent of the targets it set in the area of economics, 75 
percent in the social sector, and 91 percent in the 
governance sector.  The December 2009 Comprehensive African 
Agriculture Development Plan (CAADP) review in Kigali 
highlighted the impressive 15 percent growth in agriculture 
in 2008 and continued growth in 2009.  Contraceptive 
prevalence increased from 10 percent in 2005 to 27 percent in 
2008 while assisted births increased from 35 percent to 63 
percent during the same period.  Key challenges remain, 
including poor post-harvest management, limited access to 
quality health care and one of the highest rates of chronic 
malnutrition among young children in Africa, all areas 
currently receiving support from the USG.  Priorities include 
scaling up agriculture intensification, accelerating free 
mosquito net distribution, strengthening t 
he campaign for good nutrition and building local government 
capacity.  Another specific priority was to strengthen the 
Institute for Legal Practice and Development, a government 
organization currently receiving support under the MCC 
Threshold Program. 
 
 
Global Financial Crisis - How did Rwanda fare in 2009? 
--------------------------------------------- ------ 
 
¶8.  (SBU) The Finance Ministry's permanent secretary 
presented a retrospective of Rwanda's anticipated impacts 
from the global financial crisis a year ago, what actually 
happened during 2009, and prospects for the coming year. 
Tourism and remittances, expected to decline by up to 40 
percent, fared better with tourism revenues falling only 6 
percent.  However, both coffee prices and volumes fell more 
than expected - with coffee export earnings declining by 
about 21 percent in 2009.  Total export values were $140 
million in 2009, compared to $183 million a year earlier. The 
expected decline in import values did not occur and the 
volume of consumer imports increased substantially (40 
percent).  Total imports increased by 8 percent in 2009 with 
a value of approximately $1.23 billion, widening the balance 
of payments deficit.  Looking forward, inflation is falling 
from above 20 percent over a year ago to close to 5 percent. 
Mineral prices--Rwanda's largest export--are showing signs of 
increasing and the GOR has 
met tax revenue targets.  GDP growth is projected to remain 
positive and above the sub-Sahara African average. 
 
 
COMMENT 
------- 
 
¶9. (SBU) Rwanda's characteristic strong ownership and 
management of its aid agenda is increasingly evident.  We saw 
it at the CAADP meetings in December; we saw it during the 
most recent PEPFAR Country Operating Plan and Framework 
Agreement negotiations; and we see it in GOR/donor forums, 
such as the retreat that just ended.  Limiting development 
partners' direct engagement to fewer areas, promoted under 
the Paris Declaration and Accra Agenda, is one way of cutting 
the heavy work burden senior GOR officials face in dealing 
with development partners--the GOR highlighted the World 
Qwith development partners--the GOR highlighted the World 
Bank's many missions as particularly labor-intensive for the 
GOR.  There remain a number of unanswered questions, 
including timing for the division-of-labor transition, 
exceptions to the three-sector rule, and how broadly one can 
interpret an intervention to fit an assigned sector, etc. 
 
¶10. (C) Comment continued:  During a February 11 meeting with 
visiting State AF/C office director Cynthia Akuetteh, the 
Ministry of Foreign Affairs permanent secretary raised the 
issue and appeared to understand that limiting the US to 
three sectors could be problematic for GOR interests as well. 
 After Emboff noted that Rwanda's Millennium Challenge 
 
KIGALI 00000122  003.2 OF 003 
 
 
Threshold programs in police, media, and justice don't fit 
within the proposed sectors, the permanent secretary 
suggested that donors could work outside their three sectors 
as "silent partners," adding that the GOR and USG should have 
a "frank discussion" to determine the way ahead on this 
question.  Post will discuss this issue with Washington 
counterparts and the GOR in coming weeks.  END COMMENT. 
CASPER