Fitch predicts further steady aid flows

Fitch Ratings, one of the world’s most respected rating agencies, has predicted that following Britain’s recent decision to partially disburse frozen aid to Rwanda, more donor countries are likely to make a similar move.

Sunday, September 09, 2012

Fitch Ratings, one of the world’s most respected rating agencies, has predicted that following Britain’s recent decision to partially disburse frozen aid to Rwanda, more donor countries are likely to make a similar move.Britain and other development partners, including the United States, Sweden and the Netherlands, suspended support to the country after a controversial United Nations Group of Experts report accused Kigali of backing rebels fighting in the east of the Democratic Republic of Congo.Rwanda disputed the findings of the report and submitted a rebuttal to the UN Security Council.However, UK last week agreed to release $12 million (7.5 million pounds) out of $25 million in deferred aid.A statement posted on Fitch’s website says ; "We now expect other bilateral donors to take decisions on aid disbursements in the coming months, with some waiting for the final UN report on the issue due in November 2012. Nevertheless, we believe that Rwanda will continue to attract significant aid flows from international donors, reflecting its strong track record in poverty reduction and control of corruption.”It adds, "The UK decision to disburse half of its frozen general budget support to Rwanda will come as a relief for the latter’s budget. Total grants (including general budget support, sectoral and capital grants) from international donors account for almost half of government revenue (44% of revenue in FY12), and the UK is the biggest bilateral donor for general budget support. The amount that the UK will now pay out represents 0.2% of GDP or 0.7% of government revenue.” UK had held several roundtable discussions with Rwanda before unblocking the aid.The Permanent Secretary in the Ministry of Finance, Kampeta Sayinzoga said, "We have been in talks with other donor countries as well, but its better they announce for themselves when they may unfreeze the aid.”Fitch affirmed Rwanda’s rating at ‘B’  in August 2012. The rating is supported by solid economic policies and a track record of structural reforms, macroeconomic stability and low government debt (22.8 per cent of GDP).Despite suspension of aid to the country, donors  countries still retain the view that Rwanda has established itself as an aid effective country with proper coordination, harmonisation, and an alignment framework.