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Cablegate: Rwanda Congressionally-Mandated Report On Fiscal

VZCZCXYZ0025
RR RUEHWEB

DE RUEHLGB #0179/01 0731139
ZNR UUUUU ZZH
R 131139Z MAR 08
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC 5178
INFO RUEHNR/AMEMBASSY NAIROBI 1158
RUEHDR/AMEMBASSY DAR ES SALAAM 1074
RUEHJB/AMEMBASSY BUJUMBURA 0260
RUEHKM/AMEMBASSY KAMPALA 1842
RUEHFR/AMEMBASSY PARIS 0436
RUEHKI/AMEMBASSY KINSHASA 0395
RUEHDS/AMEMBASSY ADDIS ABABA 0158

UNCLAS KIGALI 000179

SIPDIS

SIPDIS

REF: A. 07 Kigali 000935
B. STATE 16737

DEPARTMENT FOR AF/C
DEPARTMENT PASS USTDA: EEBONG
DEPARTMENT PASS USTR: WJACKSON
DEPARTMENT PASS COMMERCE: RTELCHIN
DEPARTMENT PASS OPIC: BCAMERON
ADDIS FOR LISA BRODEY

E.O. 12958: N/A
TAGS: EFIN ECON PGOV EINV ENRG ETRD EPET BTIO RW
SUBJECT: RWANDA CONGRESSIONALLY-MANDATED REPORT ON FISCAL
TRANSPARENCY


1. SUMMARY: President Paul Kagame continues to be a
strong proponent of fiscal transparency within the
Rwandan government (GOR). His government's strong anti-
corruption stance, policies of financial openness and
several significant financial reforms have been commended
by the IMF as well as other multi-national organizations
and donor missions. Following the dictates of the
Organic Budget Law, each fall the budget for the upcoming
year is presented to Parliament and, once passed, is
published in both the official gazettes and online.
While financial accountability has been sometimes
hindered by a lack of capacity, the GOR is working hard
to make improvements in the area. Kagame's mandate for
fiscal transparency is supported by the large donor
community who provide 50 percent of GOR's budget. The
donor community's support for fiscal transparency is
often twofold, mandating fiscal transparency in GOR
budgetary accounts while funding independent projects to
foster transparency and accountability throughout the
GOR. End Summary.

2. Each fall the Finance Minister presents to the
Parliament the budget for the upcoming fiscal year, which
runs January - December. The GOR encourages members of
Parliament, donors and individuals from the private
sector to weigh in on the budget. Once approved by
Parliament, the budget is then published in the official
gazettes in Kinyarwanda, English and French. Since 2006,
the GOR has also posted the budget online in both French
and English on the Minster of Finance's website. The
published budget is extensive and contains all GOR
revenues and expenditures. The online posting allows
users to view the budget breakouts by Economic Category,
Agency, Programmes or Sector and Sub-Sector.
Additionally, the 2008 Budget online posting contains
budgetary estimates through 2010.

3. Beyond the budgetary process, President Kagame's
strong commitment to fiscal responsibility has meant the
GOR has been committed to working with multi-national
organizations in areas of fiscal reform, anti-corruption
and good governance. The GOR continues to work the IMF
to ensure that Rwanda is compliant with IMF standards and
codes covering fiscal transparency. The IMF reports on
Fiscal Transparency (2003), Banking Supervision (2005)
and Monetary and Financial Policy (2005) proposed a
number of recommendations that have been adopted by the
government.

4. One of the most ambitious projects undertaken by the
GOR is the Public Financial Management Reform Project
(PFMRP) which started in the mid-2000s. Run by the
Ministry of Finance, the project is designed to bring
greater fiscal transparency and accountability through a
multi-tiered approach to creating a more comprehensive
financial structure and oversight. Under PFMRP, the GOR
introduced a broad range of reforms including crafting
new legal frameworks for the management of public
finances, development of training programs, strengthening
audit programs, and implementation of new standardizing
financial software. In 2006, the first set of
consolidated public accounts was published showing all
Qconsolidated public accounts was published showing all
revenues, expenditures, financial assets and liabilities
at a national level. In 2007, a new Organic Budget Law
went into effect and the PFMRP began a four-year
strategic plan with continued financial reforms planned
through 2010.

5. While the GOR has a strong commitment to fiscal
transparency and good intentions to bring this policy
into all levels of the government, the lack of capacity
sometimes hinders full financial accountability. In
October 2007, IMF officials found that implementation of
the Organic Budget law suffered from complicated
regulations being implemented by ministries and agencies

that were understaffed and undertrained (see ref A). The
GOR agreed with the IMF?s assessment, and the two
recently signed a MOU in February in which improved
management and coordination of the budget is a benchmark
goal of Rwanda's IMF Poverty Reduction and Growth
Facility Program.
6. While the expenditures listed in the budget are
accurate, recent internal audits have shown troubles in
the management and oversight of the finances, due again
to lack of capacity. The Office of the Auditor General
for State Finances is a government agency that performs
annual internal audits of the GOR?s finances. In Oct
2006, the Auditor General reported that at least Rwf 3.6
billion was poorly accounted for in the 2005 budget
cycle. The audit found, among other things, poor
management and oversight practices contributed to the
lack of accountability and called for increased training
of accounting officers and board members. The GOR was
quick to respond, launching a probe the following spring
into forty-six government entities, resulting in several
criminal prosecutions. In March 2008, the Auditor
General testified before Parliament that Rwf 5.3 billion
expenditures, out of a budget of Rwf 404.7 billion, were
unsupported by sufficient documentation during the 2006
budget cycle. Reaction from Parliamentarians was swift
and angry; further investigations will follow.

6. Many donors work to bring fiscal transparency to
Rwanda. As with the IMF's Poverty Reduction and Growth
Facility Program, there are often mandatory conditions to
budgetary support that foster fiscal transparency and
accountability. The British, German and Belgium
governments, and the EU, IMF and World Bank all stress
fiscal transparency and often participate in budgetary
and financial policy meetings. The GOR has a strong
relationship with the donor community and encourages
collaboration. Donors also support independent programs
that foster fiscal transparency and good governance, as
the in case of the Swedish and Netherland governments who
provide monetary and technical support to the Office of
the Auditor General.

7. While not providing budgetary support, the USG also
continues to work for fiscal transparency and support
accountability and good governance in Rwanda. While
USAID provides a range of programs that work to foster
good governance, the Twubakane Decentralization and
Health Program specifically focuses on increasing fiscal
transparency and accountability as one of its main
components. The Twubakane Program works to not only
provide the district governments with direct funding for
health care, but to also provide the districts with the
opportunity to strengthen their budget and planning
capabilities and demonstrate their management skills. An
essential capacity building step within the program is to
train district accountants in preparation and management
of budgets as well as software to track funds.

8. Comment: The GOR and President Kagame are committed to
fiscal transparency and accountability and are continuing
to undertake numerous reforms to foster accountability
and fight corruption. Although the government does
Qand fight corruption. Although the government does
struggle with a lack of capacity which can sometimes
hinder its ambitious set of fiscal reforms, the GOR is
proud of its good reputation for fiscal accountability
and will continue to hard work to safeguard it.

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