The politics of donor aid

By Ernest Rwamucyo

African governments should know that aid commitments are a talk-show as donors can refuse to honour agreements

The decision of some donors to suspend aid to Rwanda raises a fundamental question on the rationale for rich countries to give aid to poor countries. Is the major reason for aid to reduce poverty and help raise the welfare of the poor in developing countries or is to increase the ability of rich countries to exercise political leverage over them?

The decision on Rwanda will confirm the rarely discussed, but widely held view that the raison d’être for aid is mainly for political leverage. It increases control and potential for arm stringing of the poor by the rich.

Rwanda is consistently rated as a country that uses aid wisely, productively and to the best benefit of its people. The 2010 United Kingdom Department for International Development Department (DFID) evaluation of the impact of UK aid globally, ranked Rwanda highest in delivering best value for every pound of aid given to the country.

Over the last five years alone, with effective use of aid and domestic resources, Rwanda helped over one million of its citizens raise themselves out of poverty. According to the results of the 2011 externally validated household living conditions survey, the poverty headcount reduced by an unprecedented 12 percentage points, with poverty reducing faster in rural areas than urban areas and inequality declining as measured by the geni-coefficient.

This achievement was termed by the highly respected Oxford University Economist, Paul Collier, as a development hat trick – high economic growth resulting in significant reduction of rural and urban poverty, with inequality falling. This means the benefits of a decade of growth are fairly and equally distributed across the country.

Rwanda is one of few sub-Saharan African countries on track to achieve almost all the Millennium Development Goals by 2015.

The country has been able to put all children of school-going age in school and they are guaranteed to stay in class until they finish the nine years of basic education. Child mortality has significantly reduced.

The Rwandan population enjoys universal health insurance coverage, guaranteeing access to basic health services.

There is no question that aid to Rwanda reaches those who need it most. It has the desired impact and delivers best value for money. The country has a strong accountable public finance management system, a zero tolerance policy to corruption and robust engagement with donors.

So every pound of aid is accounted for and can be tracked to tangible and verifiable results. There is, therefore, no doubt that if the raison d’être for aid is to reduce poverty and benefit the vulnerable, Rwanda is a star performer.

For donors to suspend aid to the country based on allegations in a highly contested United Nations “Group of Experts” report to the UN Sanctions Committee on DRC raises serious questions about the intentions of donors when they give aid. This has far reaching implications beyond Rwanda.

The crisis in the Democratic Republic of Congo has been around for decades. It didn’t start with the M23 which Rwanda has expressly and strongly denied it supports. DRC has experienced over four decades of governance failure, institutional decay, corruption, insecurity and conflict. The current crisis is a direct result of the country’s political and historical complexity. This is external to Rwanda which has its own internal priorities of reconstruction after a tragic genocide in 1994.

The carnage, death, loss of life and humanitarian crisis that has gone on for decades in DRC is painful and inexcusable. It must stop. This can be achieved by genuinely addressing the root causes of the cycle of conflict and finding a lasting solution. Any sustainable solution will have to be DRC led. This requires ownership by the Congolese to genuinely seek a political dispensation that will bring durable peace and stability.

Rwanda as a neighbor can only help where it is needed. Indeed Rwanda has been pro-actively engaged with the DRC government and within the framework of the International Conference for Great Lakes led regional initiative to find a lasting solution to the crisis.

The suspension of budget support, despite Rwanda’s efforts and demonstrated goodwill to help ensure stability prevails in the region, while rebuilding after being a failed state in 1994 is a slap in the face. This action harms Rwanda, but will not help DRC either.

Rwanda has built a successful partnership with its development partners. The country has played a key role as an inspiration in the conception and implementation of the Paris Declaration on aid effectiveness. The declaration was influential in re-shaping the relationship between donors and aid recipients. It sought to re-define the relationship as one of development partnership rather than paternalism. Principles of encouraging countries to own their development process and donors to ensure the quality of aid is improved, predictable and aligned to country-owned priorities are at the core of the Paris Declaration signed by donor countries and aid recipients. The framework for mutual accountability has been championed by the OECD-DAC and Rwanda has been hailed as meeting its part of the bargain.

Rwanda has been instrumental in ensuring that this new aid architecture is feasible and works. In December 2011, the country represented Africa and brought the continent’s voice at the Fourth High Level Forum on Aid Effectiveness in Busan, South Korea. President Paul Kagame spoke eloquently in Busan about the strength of this new era of development partnership and the promise it held.

Less than a year after Busan and donors re-affirming their commitment to ensure aid works for the poor, Rwanda, the star performer, is a victim of the violation of the same commitments that donors first agreed on in 2005 in Paris and re-affirmed in the Accra Agenda for action in 2008.

The decision on Rwanda affirms that aid remains very highly politicised. It demonstrates that donors, at the expense of the poor and vulnerable, will use aid to push for political objectives or to reward compliance and punish non-compliance depending on “development partner” interests.

Budget support to Rwanda was frozen not because the country has failed to use it for the benefit of those who need it most, but to influence a political end in the DRC. There is no direct link between what is happening in the DRC and what aid achieves for ordinary Rwandan citizens. This is definitely not the right way to solve DRC’s problems. Rwanda should not be penalised for the failures of another country.

Critics of general budget support present it as if donors give the aid to Rwanda as a blank cheque that government can spend as it wishes. That is not true. The Government of Rwanda in its annual budget preparation works with its development partners to agree on allocations to agreed priority programs and results are pegged on a well-defined verifiable results framework. So donors know ahead of time where their money is going and what it will achieve.

While the case of bilateral donors withholding aid due to political consideration may be understood, the worst precedent that has been set is the politicisation of the multilateral development agencies – The World Bank and African Development Bank. This is unprecedented and has far reaching implication beyond Rwanda.

The World Bank and the AfDB are development Banks. Politics should be kept out of their business and operations. Rwanda has not violated any agreement with the institutions. Donors must keep politics out of these reputable global organisations whose sole mandate is development and not politicking. This may be about Rwanda today, but the implications for the functioning, governance, and reputation of these banks and the countries they serve is far reaching and exposes them to risk. This must stop. Rwanda has not violated any terms of the World Bank or the Africa Development Bank and interests in DRC that have nothing to do with Rwanda should not be brought into their governance and decision-making process. There is no reason for the rich countries of Europe to politicise these institutions. This is a very dangerous path and should not be ignored or seen as limited to Rwanda.

One important point to underscore is that these political decisions directly affect the poor. They compromise the quality of aid which has an adverse effect on the quality of development outcomes and results. But fundamentally the belief that aid is primarily aimed at reducing poverty and improving the welfare of the poor is greatly undermined. Even ordinary citizens begin to perceive aid as a tool only intended for political control and to buy political leverage and influence.

The Rwanda case should therefore not be seen in isolation. It should awaken developing countries to the reality that aid is very volatile. It is intensely more political than we have previously believed. We can no longer claim that aid is fundamentally for poverty reduction and development when at the flimsiest excuse, lives of the poor can be put on line due to political considerations.

Developing countries also need to reflect on the nature of the relationship between donors and aid recipients. Is it truly a development partnership or paternalism? Until recently, Rwanda had believed that the relationship had moved closer to a partnership. Reality has now dawned that aid remains very unpredictable and the donor-aid recipient relationship might be slipping back into the 1960s approach where political, military and economic interests were the major determinants of the nature of aid countries received.

Donor commitments are increasingly becoming a talk-show and mature democracies of the world can renege on their own commitments and fail to honor agreements on aid disbursements without accountability.

I would be curious to know what we would be saying if the Busan High Level Forum on aid effectiveness was happening tomorrow and the evaluation of progress on the forgotten Paris Declaration on aid effectiveness was happening today. We certainly have another aid effectiveness show coming in the near future and the same commitments will be rehashed.

Ernest Rwamucyo is the Rwanda High Commissioner to the UK.