The Government and the Federal Republic of Germany yesterday signed a bilateral financing agreement worth €7 million (about Rwf5.5 billion) to support decentralisation programme and good governance in the country.

The agreement is in form of grant and will be allocated under the Local Administrative Entities Development Agency (Lodfa), formerly known as Rwanda Local Development Support Fund.

The funds will also finance income generation and economic infrastructure including schools, feeder roads and markets.

Projects to be undertaken will be based on priorities stipulated in district development plans, Amb. Claver Gatete, the minister for finance and economic planning, said.

According to Gatete, districts will be allowed to implement most local prioritised projects, thus making them more responsive to specific local needs and enhance local accountability.

Minister Gatete added that the grant will not only support rural development and create employment opportunities but also help tackle effects of climate change.

"It is in line with rural development priorities as stipulated in the second Economic Development and Poverty Eradication Strategy (EDPRSII),” Gatete said during the signing ceremony in Kigali yesterday.

The funds will also finance institutional support at the level of Loda mainly in the areas of project preparation and planning, monitoring and evaluation and development of a citizen feedback mechanism, Vincent Munyeshyaka, the permanent secretary at the Ministry of Local Government, said.

"We are talking about service delivery to the population, and projects including roads, market infrastructure, and helping to speed up implementation of government development programmes through financing local economic activities,” Munyeshyaka said.

The German Ambassador to Rwanda, Peter Fahrenholtz, said the agreement underlines the long-standing and proven cooperation between the two countries based on friendship and mutual trust.

"Decentralisation is the best way to address hindrances to economic development of any economy. This requires good governance and delivering services to the citizens,” Fahrenholtz said.

The Federal Republic of Germany, under its development organisation (KFW), has been supporting decentralisation through local infrastructure investments since 2006 and has financed individual projects such as schools, health centres, electrification, roads and bridges, modern markets and terracing, among others, worth €34 million to date.