Rwanda is feeling the effects of the recent aid funding cuts made by international donors in response to alleged complicity of Rwanda in unrest in neighbouring Democratic Republic of Congo. The UK, US, European Union, Germany, Netherlands and other major donors cut their aid to Rwanda almost two months ago following a UN report which accused Rwandan officials of providing active support for M23 rebels in the DR Congo.
As aid accounts for around 40% of Rwanda’s budget, the government’s ability to meet its planned expenditure targets is significantly compromised. Spending has been postponed on a range of agriculture, health, infrastructure and justice projects. Recruitment of civil servants has been frozen, and there is some expectation that civil servant salaries will be slashed in a supplementary budget later this month.
The Rwandan government finances most of the country’s development projects, and business confidence has fallen away given that significant decreases in government spending are anticipated. It is feared that a liquidity crisis may occur soon, and interest rates on bank deposits have doubled in the past two months, making access to credit increasingly unaffordable.