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«November 30, 2010 Executing Agency: Government of Rwanda, Ministry of Finance and Economic Planning PEFA Assessment Team: Elena Morachiello – Team ...»

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Government of Rwanda

Public Financial Management Performance Report


Final Report

November 30, 2010

Executing Agency:

Government of Rwanda, Ministry of Finance and Economic Planning

PEFA Assessment Team:

Elena Morachiello – Team Leader and International Consultant

Kevin Curnow – Deputy Team Leader and International Consultant

Clinton D. White – Senior Development Officer, USAID

Francis Mugisha – National Consultant Charles Gasana – National Consultant Stephen Hitimana – National Consultant Public Financial Management Performance Report 2010 Government of Rwanda Table of Contents Abbreviations and Acronyms


1.0 Introduction

1.1 Objectives and Scope

1.2 Methodology and Process

1.3 Quality Assurance

Table 1: Central Government (CG) Indicator Overview (PEFA 2010 and 2007)................ 10 Table 2: Sub-National (SN) Indicator Overview (PEFA 2010)

2.0 Country Background Information

2.1 Growth Rates, MDGs and Poverty

2.2 Country Economic Profile

Table 3: Macro-Economic Indicators

2.3 Budgetary Outcomes

Table 4: Budgetary Outcomes and Medium-Term Projections

2.4 Government Reform Program

2.41 The Economic Development and Poverty Reduction Strategy (EDPRS)

2.42 PFM Reform Strategy

Table 5: PFM Reform Pillars and Components

2.43 The National Decentralization Policy

2.5 Legal and Institutional PFM Framework

2.51 Central Government

2.52 Sub-National Governments

2.6 Sub-National Structure in Rwanda

2.61 Administrative boundaries and Local Government units

2.62 Sub-national Government Institutional Arrangements

2.63 Funding of Sub-national Government operations

2.7 Donor Coordination in Rwanda

2.71 Donor Coordination Groups

2.72 Monitoring System

3.0 Integrated Summary Assessment of PFM Performance

3.1 Summary of Assessment Indicator Scores

3.2 Credibility of the budget

3.3 Comprehensiveness and Transparency

3.4 Policy-based budgeting

3.5 Predictability and Control in Budget Execution

3.6 Accounting, recording and reporting

3.7 External scrutiny and audit

3.8 Donor Practices

4.0 CG: Assessment of PFM Systems, Processes and Institutions............... 35

4.1 Budget Credibility

Table 6: PI -1 and PI-2 Results Matrix

Table 7: Domestic Revenue, Budget compared to out-turn (2008, 2009, 2009/2010). 37 Table 8: Stock of Arrears (2007, 2008 and 2009) by expenditure category, & as a % of Total CG Expenditure (in Rwf)

4.2 Transparency and Comprehensiveness

Table 9: Information Benchmarks

Table 10: LABSF (Parameters, Data Sources and Weights FY 2010/2011

2 Public Financial Management Performance Report 2010 Government of Rwanda Table 11: The Six Elements for key public access to fiscal information

4.3 Policy- Based Budgeting

Table 12: Rwanda Budget Calendar for the preparation of the 2010/2011 budget............... 55 Table 13: MTEF/BFP Outer Year Links in (Billion Rwf)

4.4 Predictability and Control in Budget Execution

Table 14: Penalties & Arrears FYs 2007, 2008, 2009,2009/2010

Table 15: Arrears & Collections FYs 2007, 2008, 2009, 2009/2010

Table 16:Procurement Procedures, FYs 2008, 2009 & 2009/2010

4.5 Accounting, Recording and Reporting

4.6 External Scrutiny and Audit

Table 17: Members of the Parliamentary Budget Committee

Table 18: Budget Committee’s Scrutiny of Auditor General's Report

4.7 Donor Practices

Table 19: Budget Support for the period 2008, 2009, 2009/2010

Table 20: Aid Disbursed by Government Sector

5.0 SN: Assessment of PFM Systems, Processes and Institutions............. 111 Table 21: Sub-National (SN) Indicators

5.1 Budget Credibility

Table 22: PI -1 and PI-2 Results Matrix

Table 23: Budgeted versus actual HLG transfers, FYs 2007, 2008, 2009

5.2 Comprehensiveness and Transparency

Table 24: The Seven Key Public Information Elements

5.3 Budget Cycle

6.0 Government Reform Process

6.1 Description of recent and on-going reforms

6.2 Institutional factors supporting reform planning and implementation

6.3 Fiscal Decentralization and PFM

6.4 Shortcomings of the current policy actions and key challenges for PFM................. 138 Annexure

Annex 1 CG: Assessment of Budget Compared to Actual Expenditure

Annex 2 CG: Aggregate Revenue Out-Turn Compared to Original Approved Budget.... 144 Annex 3 SN: Assessment of Budget Compared to Actual Expenditure

Annex 4 HLG-1: Budgeted Versus Actual HLG Transfers per Functional Head................ 155 Annex 5 List of persons Interviewed

Annex 6 Documents Consulted

3 Abbreviations and Acronyms AAP Assessment and Action Plan ACCA Association of Chartered Certified Accountants ACHA Aid Coordination and Harmonization Framework AER Annual Economic Report AG Accountant General AGA Autonomous Government Agency BCC Budget Call Circular BCDI Bank of Commerce Development and Industry BCR Banque Commerciale du Rwanda BER Budget Execution Report BFP Budget Framework Paper BNR Banque Nationale de Rwanda BSHG Budget Support Harmonization Group CBTI Capacity Building and Technical Input CDF Common Development Fund CEPEX Central Public Investments and External Finance Bureau CFS Consolidated Financial Statements CG Central Government COFOG Classification of the Functions of Government CSR Caisse Sociale du Rwanda DAD Development Assistance Database DAF Director of Administration and Finance DBS Direct Budget Support DFID Department for International Development DPCG Development Partners Coordination Group DRI Debt Relief International DSA Debt Sustainability Analysis EAC East African Community EC European Commission EDPRS Economic Development and Poverty Reduction Strategy EFU External Finance Unit FARAP Financial Accountability Review and Action Plan FARG Fund to Assist Refugees and Genocides FY Fiscal Year GBE Government Business Enterprise GDP Gross Domestic Product GFSM Government Financial Statistics Manual GoR Government of Rwanda GPIAU Government Principal Internal Audit Unit IASB International Accounting Standards Board ICT Information Communication Technology IFMIS Integrated Financial Management Information Systems IMF International Monetary Fund IPPS Integrated Personnel and Payroll Information System IPSAS International Public Sector Accounting Standards IT Information Technology LABSF Local Authorities Budget Support Fund LGBSF Local Government Budget Support Fund LM Line Ministry MDAs Ministries, Departments, Agencies MDGs Millennium Development Goals MIFOTRA Ministry of Public Service, Skills Development, Vocational Training & Labor Public Financial Management Performance Report 2010 Government of Rwanda

–  –  –

Foreword The Assessment Team is grateful for the cooperation and support of the Government of Rwanda (GoR): particularly staff of the Ministry of Finance and Economic Planning (MINECOFIN) and key staff from the Office of the Auditor General and the Parliamentary Committee on Budget and National Patrimony.

The Accountant General, Patrick Shyaka, and Robert Mpagi, PFM Reform Secretariat Coordinator, were responsible for managing the process on behalf of the GoR, for ensuring an active participation from MINECOFIN and other Government constituencies, and a swifter provision of data and information to the Assessment Team. In this respect, the Assessment Team wants to thank in particular Charles Karakye and Innocent Mujyambere from MINECOFIN that directly assisted the Team in the follow-up of information queries, the collection and gathering of evidence and documentation for the Assessment and ensuing PFM-PR Report.

The PEFA 2010 was funded by the Multi-Donor Trust Fund for PFM Reforms (financed by DFID and the European Union and administered by World Bank) and by an additional funding from KfW.

The World Bank and KfW have been particularly active in supporting the PEFA 2010 process.

USAID has also actively participated in the process and the Assessment by seconding USAID staff Clinton D. White as a full member of the Assessment Team. The support of the World Bank, KfW and USAID is appreciated by both the Assessment Team and the other PFM stakeholders.


1.0 Introduction Rwanda has made remarkable progress since the tragedy of the 1994 genocide, with growth in real per capita income averaging nearly five percent and accelerating to an average of almost six percent in the last five years. It nevertheless remains one of the world’s poorest countries. UNDP ranked Rwanda 167 out of 182 worldwide on its most recent Human Development Index. According to a household survey undertaken in 2005/6, 57 percent of the country’s nearly 10 million people lives below a poverty line of approximately $1.30 per day, of which nearly two-thirds, or 37 percent of the total population, fall below an extreme poverty threshold of about $0.90 per day.

1.1 Objectives and Scope The main objective of the CG Assessment is to analyze whether the measures undertaken as part of the PFM Government Reform Program inaugurated in 2008, which is described under section 2.42, have already had an effect on the PFM system, and to assess whether progress has been achieved in PFM areas compared to the status witnessed by the previous PEFA Assessment undertaken in 2007, for the FYs 2004, 2005 and 2006. 1 The two objectives are linked as the GoR PFM Reform Strategy for 2008-2012 was delineated after and on the basis of PEFA 2007 results. The objective for the SN Assessment, limited to 4 districts and 12 indicators, is to provide an initial snapshot of PFM systems and processes at the SN level given the ongoing fiscal decentralization.

1.2 Methodology and Process This assessment of PFM in Rwanda is based on the PEFA Performance Measurement Framework.2 The Framework was developed by the Public Expenditure and Financial Accountability (PEFA) partners as a tool that can provide reliable information on the performance of PFM systems, processes and institutions at a point of time and, by comparing ratings at two points of time, assess the progress over the intervening period.

The Central Government (CG) Assessment was undertaken through desk review of previous diagnostic reports, and two main missions for interviews with government officials and direct collection of evidence. The first mission took place for two and a half weeks in early July 2010, and the second between August 15th and September 1st, 2010. The Local Government Assessment for 4 districts and 12 selected indicators was conducted also on the basis of prior diagnostic work, after having collected substantial supporting documentation from CG during the above-mentioned missions, and through additional field trips to the selected sub-national governments of Bugesera, Kicukiro, Nyamagabe and Rulindo, between 20 July and 18 August 2010. The donor representatives and Government officials at both CG and LG levels interviewed by the Assessment Team are listed under Annex 5. Prior diagnostic work on Rwanda and PFM, as well as the documentation gathered by the Assessment Team through the missions, are listed under Annex 6.

The SN Assessment, for a sample of 12 indicators and 4 sub-national governments in Rwanda, follows the draft PEFA sub-national methodology.3 The initial 2010 PEFA Assessment ToRs and the 1 Republic of Rwanda 2007, Public Expenditure and Financial Accountability Assessment Public Financial Management Performance Report Final Report November 2007, Rwanda.

2 Public Expenditure and Financial Accountability (PEFA): Public Financial Management Performance

Measurement Framework, PEFA Secretariat, June 2005. The methodology is available at the PEFA website:


3 PEFA, Guidelines for application of the PEFA Performance Measurement Framework at Sub-National Government Level, Volumes 1and 2, Exposure draft, PEFA Secretariat, March 2008.

The methodology is available at the PEFA website: www.pefa.org.

Public Financial Management Performance Report 2010 Government of Rwanda associated World Bank funded budget catered for carrying out a PEFA assessment for the central government only. However, in light of the planned fiscal decentralization efforts, donors in consultation with Government considered it critical to obtain an understanding of the current PFM situation within the sub-national governments in order to guide future PFM enhancement efforts.

However, due to budget and time constraints, a full assessment of the SN governments was not considered possible. Further funding was obtained from KfW in order to allow for a limited assessment of the SN governments. The selection of the SN indicators was done in close consultation between the donors and government. In the future, once budget and time constraints are eliminated, it will be preferable to consider the application of the entire set of SN indicators. The 12 indicators that were selected are: PI-1, PI-2, PI-8, PI-10, PI-11, PI-16, PI-18, PI-20, PI-22, PI-24, PI-26 and HLG-1.

The selection of 4 districts was partly a result of the time and budget constraints mentioned above.

Mainly, in light of the time and budget constraints, government and the donors chose a representative sample that would cover the various rural provinces in the country and at least one municipal district.

The Bugesera district, represents the Eastern Province; Nyamagabe district, the Southern Province;

Rulindo district, the Northern Province; Kicukiro district, represents Kigali Province (municipality).

The selection of the 4 districts was approved by the PFM Reform Steering Committee.

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