Impact of foreign aid on rwanda's socio-economic development as guided by Millennium Development Goal (MDG) 1 “Eradication of extreme poverty and hunger”:case of Gasabo District

TABLE OF CONTENTS

DECLARATION ii

RELEASED FORM iii

APPROVAL FORM iv

DEDICATION v

ACKNOWLEDGEMENTS vi

ABSTRACT vii

LIST OF FIGURES AND TABLES viii

LIST OF APPENDICES x

ACRONYMS xi

TABLE OF CONTENTS xiv

CHAPTER ONE: INTRODUCTION AND OVERVIEW 1

1.1 Background to the Study 2

1.2 Statement of the Problem 10

1.3 Research Questions 11

1.4 Objectives of the Study 11

1.5 Assumptions of the Study 12

1.6 Significance and Justification of the Study 13

1.7 Definition of key terms 15

1.8 Delimitation of the Study 16

1.9 Limitations of the study 17

1.10 Organisation of the Study 18

1.11 Chapter summary 19

CHAPTER TWO: REVIEW OF RELATED LITERATURE 20

2.0 Introduction 20

2.1 Theoretical Frameworks 20

2.2 Conceptualizing aid, development, poverty and hunger 32

2.3 History of Foreign Aid in Rwandan Economy 38

2.3.1 Aid Effectiveness in Rwanda 40

2.3.2 The Politics of Official Development Assistance on Rwanda 42

2.3.3 The World Bank and UNDP Poverty Indicators-Indices 43

2.4 Foreign Aid and Economic Development in LDCs 47

2.4.1 General Global Trends 47

2.4.2 Foreign Aid and Economic Development in Sub-Saharan Africa 51

2.4.3 Challenges Experienced by Government in Making External Aid Effective 54

2.5 Implications of Literature Review 56

2.6 Chapter summary 58

CHAPTER TRHEE: RESEARCH METHODOLOGY 59

3.0 Introduction 59

3.1 Research Design 59

3.1.1 Research Design - An overview 59

3.1.2 Exploratory and Descriptive Phases of the Research Project 60

3.1.3 An overview of the existing situation of the Gasabo District as the case study 61

3.1.4 Sources of Data 63

3.1.5 Types of data 63

3.1.6 Target Population, Sampling and Sampling Procedures 64

3.2 Data gathering instruments 66

3.2.1 An Overview 66

3.2.2 Structured in-depth Interviews 67

3.2.3 The Questionnaire method 68

3.2.4 Focussed Group Discussions 69

3.2.5 Documentary analysis/content analysis procedures 70

3.2.6 Observational schedules (Participant and non-participant observation) 71

3.3 Data presentation and analysis 71

3.4 Chapter summary 72

CHAPTER FOUR: DATA PRESENTATION, INTERPRETATION AND ANALYSIS 73

4.0 Introduction 73

4.1 Discussion of questionnaire findings 74

4.1.1 Questionnaire Administration 74

4.1.2 Quali-Quantitative Analysis of Questionnaire Data 74

4.1.3 Overall synthesis of findings from the questionnaire 91

4.2 Qualitative Analysis of Findings 91

4.2.1 Interview data from administrators 92

4.2.2 Data from Observational schedules 100

4.2.3 Documentary Analysis Procedures 104

CHAPTER FIVE: 110

SUMMARIES, CONCLUSIONS AND RECOMMENDATIONS 110

5.0 Introduction 110

5.1 Summary of the major findings 111

5.2 Conclusion of the study 113

5.3 Recommendations for this study 114

REFERENCES 116

ELECTONIC RESOURCES 125

APPENDICES 126

CHAPTER ONE: INTRODUCTION AND OVERVIEW

The instrumental role of foreign aid on Rwanda?s socio-economic development has always been

a topical subject of debate am ong scholars, intellectuals, social scientists and developmentalists

respectively. On one extrem e end, it is argued that foreign aid is not necessary whereas on the

As such, the attainment of the prime goal of the so-called Millennium Development Goals
(MDG 1) «To eradicate extreme poverty and hunger» largely hinges on the foreign support
Rwanda may happen to receive from various corners of the world. What it entails is that the

relativity nature of development may generate m ixed feelings to the extent that people may fail

to arrive at a universal agreement with regard the best way to attain socio-economic

development.

However, it is the conviction of this study to move a strong motion that Rwanda?s socioeconomic development entirely depends on the magnitude at which various stakeholders join hands and aim at eradicating or seeking the

optimum ways to ameliorate poverty in society. It is therefore the focus of this study to make a scholarly inquiry into this seemingly grey area and

ascertain the best possible w ays and strategies to adopt as Rwanda embarks on this critical
voyage (poverty eradication).

Against this background, it follow s that there is great need to establish the viable strategies upon

which poverty can be reduced. One fundamental strategy lies in marrying foreign aid with the available strategies linked to MDGs.

According to World Bank and International Monetary Fund (WB-IMF, 2002) recommendations, one of the ways of realizing this goal is provision of aid to less developed countries (LDCs) by more developed countries (MDCs). Such aid is supported by WB & IMF - directed economic structural adjustment programs. One may underscore the fact that the various programmes will be tailor-made to focus on specific developmental targets hence attainment of socio-economic development in some way.

The pivotal or multi-million dollar question that arises then is: to what extent can such conditional aid contribute to the socio-economic development of the host country in the long run? And to answer this question, one needs to remember what Mushi (1982:09) says about positive aid: that «aid is developmental only if it lays the foundation for its future rejection». That is to say aid is only truly useful if in the long run it promises and guarantees self-reliance and economic self-sustenance to the beneficiary. Otherwise if aid creates perpetual dependence then it is not useful at all in the first place. Thus, the dynamic views associated with foreign aid will eventually make it perceived at varying degrees of usefulness particularly in developing nations.

1.1 Background to the Study

In Rwanda aid has been coming from various quarters, chief among them United Nations Development Program (UNDP) and World Bank (WB) following the genocide. Against this backdrop, the purpose was partly to assist with reconstruction and also to eradicate poverty and hunger, the latter being done under the auspices of the MDGs. This study therefore, seeks to

assess whether such aid has a positive or negative impact on the Rwanda?s socio-economic development by focusing on the particular case of Gasabo District.

Millennium Development Goal Number 1 clearly states that the primary spirit behind all
millennium development goals is to: eradicate extreme poverty and hunger

( www.developmentgoals.org). R eduction of global poverty and hunger lies at the core of the

Millennium Development Goals (MDGs). The target is to reduce by half the proportion of

people living on less than US$1 a day in low and middle income countries - from 28 percent in
1990 to 14 percent in 2015, and halve the proportion of people who suffer from hunger during
the same period (ibid). It may seem that the twenty-five year time-frame has elapsed without any

This however will negatively impact on the entire socio-economic development of Rwanda, hence the need to investigate the circumstances surrounding the present phenomena. One may observe that, to date twenty years have passed without any material indication of success. Only five years rem ain and yet the possibility of achieving this is still a far cry. Over the years, foreign

aid has been fuelled by both political and economic m otivations of the ruling classes in the
western donor nations. A classic example is the United States of America Foreign Aid, the

Marshall Plan [1948-1951] that was aimed at rehabilitating the shattered economies of Western

Europe, at the same tim e containing the international spread of communism. When the balance

of Cold War interests shifted from Europe to the World in the mid-1950s, the policy of containment embodied in the U.S. aid program dictated a shift in emphasis toward political economic and military support for «friendly» less developed nations especially those considered geographically strategic (Todaro, 1983).

Against this backdrop, it follows that the rationale for foreign aid in general should not be perceived from a lay person?s perspective, thus it requires some introspection of some sort. Those who offer assistance primarily consider their chances of benefiting latter even if they commit themselves to some mammoth task as evidenced in the commitment to eradicate poverty. In all cases, during the socialist, colonial and post-colonial periods donor aid was meant to chart the course of globalization and the interests of global financiers; and this makes donor aid suspicious: whether it really stirs sustainable development or it simply serves the economic and political interests of the donor at the expense of host countries. This prompts the need to find out whether poverty alleviation intervention programmes initiated by the more developed countries (MDCs) in LDCs are really addressing the needs of the deserving neediest or not.

Various studies have been carried out around the globe about whether donors are angels of mercy or doom. As already been alluded to, aid has been given to LDCs in the spirit of the eight MDGs which can be summarized as to:

Eradicate extreme poverty and hunger

Achieve universal primary education

Promote gender equality and empower women

Reduce child mortality

Improve maternal health

Combat HIV/AIDS, malaria, and other diseases

Ensure environmental sustainability

Develop a global partnership for development (Todaro, 2006: 24)

From the summary, it can be argued that all the other goals are essentially subordinate and play a complementary role to MDG 1. It follows that all other goals have a bearing to MDG 1 in one way or the other, implying that to achieve the target of Goal 1 progress has to be made on the other goals as well. The irony that global studies have established regarding the attainment of poverty reduction, however, is that not much progress has been made. Foreign aid on the other side greatly increases the patronage power of recipient governments. As Bauer (2008) notes, "The great increase in the prizes of political power has been a major factor in the frequency and intensity of political conflict in contemporary Africa and in the rest of the less developed world, than developmental response. In this respect, foreign aid may be accused of meddling with the recipient nation?s political issues hence a detrimental aspect from the sceptics viewpoint. Sceptics are always conscious of their sovereignty.

UNDP, (2003), advances that in the 1990s income poverty increased in 37 countries while hunger multiplied in 21 countries. One may underscore the fact that this cardinal admission with regard the prevalence of poverty and hunger justifies the great need for foreign aid in countries like Rwanda. The poorest region in the world, sub-Saharan Africa has the worst affected countries, seconded by Latin America (ibid). Ethiopia, Rwanda, Burundi, Botswana, Kenya and Mozambique fall into this category. They have all been destinations of foreign aid as guided by MDGs. The period under which MDGs for poverty reduction have been evaluated in Rwanda has been repositioned from 1990 to 2000 following the traumatic upheaval of the 1994 genocide. According to IRIN News, (2006) initial progress was very slow with 57% of the population remaining below the national poverty line, assessed in terms of food needs and non-food essentials.

In that year alone, 37% of the population survived on an income insufficient to provide the minimum calorie requirement of MDG 1; and Rwanda experienced one of the highest levels of extreme poverty in the world. To this effect, the correlation between the existence of peace and the subsequent attainment of positive development in a nation is largely evidenced as the so-called genocide had grave and detrimental effects on socio-economic development; hence the capacity of Rwanda as a sole nation without foreign aid became hazy. To make matters worse, neither of these poverty rates had fallen by more than a few points since 2000, despite strong headlines on economic growth in the media (ibid). Indeed, the Gini coefficient¹ measure of inequality increased over that period from 0.47 to 0.51, a relatively high rate for East Africa (ibid).

The implication is that the rewards of growth were not reaching rural households, where 90% of poverty in Rwanda is located. This fact abides in spite of the optimistic view that points to the stable political environment and the availability of generous development aid of the order of $50 per capita per annum coupled with the rewards of a significant debt relief that was issued in 2005 (ibid). The fact that the threat of hunger and poverty are far from over is not even waived by the bumper harvest of 2008 which fended off the worst global food price crisis. Of course the gRheaQPeQ.117Fia.113iQly17FRQhi A17A.1aRQg 17FRQhiF.1iRQ17iQ17i.1A17F13S13Fi.1v17.1R17.1a13QAIRaP 17.1Ke 17FRoQ.1ailA17 IRa.1oQeA. 17$ 17FlD13a17IRFoA 17RQ1713FFRPSUAKIQ1170 ' * 171 17iA1713a.11Fo113.1ed17iQ171.5 Z 13Qd13lA17( FRQRPiF 17 Development Poverty Reduction Strategy (EDPRS) 2008 - 2012 and in its strategic Vision 2020, which sets out the goal of advancing to middle income status by relying less on unskilled agriculture but more on knowledge-based services such as tourism (UNDP/HDRRwanda, 2007).

1

The Gini Coefficient measures how concentrated incomes are among the population of an economy: the higher the Gini, the more concentrated

incomes are among a few people. The Gini ranges between 0 (indicating income is distributed equally between all people) and 1 (indicating all income in the economy accrues to one person).

The EDPRS results and policy matrix is organised around the 3 EDPRS flagship programs which have been aligned to the three clusters: The economic cluster which covers the Macro Economic and Financial sector and the economic sectors of Agriculture, Infrastructure (Energy, Transport), Private Sector development as well as Environment and Natural Resources management. The Social cluster covers Health, Education, Social Protection, Water and Sanitation, and Youth; And Governance cluster covers the following sector working groups: Public Financial Management (PFM), Justice, Reconciliation, Law and Order (JRLO), Decentralization, Citizen Participation, Empowerment, Transparency and Accountability (DCPETA), and Capacity Building and Employment Promotion (CBEP).

In spite of all this exuberant optimism by the Government, most observers consider that the MDGs target of halving poverty by 2015 is very unlikely to be achieved. There are signs that decentralization of government structures has not progressed as quickly as hoped, and yet this is an important factor in implementing poverty reduction programmes. On the other hand, the government continues to depend on aid for no less than 49% of its 2010 budget (ibid); and this leaves one wondering how far dependence on aid will take Rwanda?s socio-economic development.

In 2004, the Government of Rwanda (GoR) was dependent upon international development assistance to the tune of almost 50% of its overall budget, and over 80% of its development budget. It was receiving over $350 million a year in aid from over 30 bilateral and multilateral donors and a wide range of non-governmental organisations. (Hayman, 2006)

From a dependency theory point of view, this has an impact particularly on the direction of development since the donors may pursue their own socio-political agendas that may filter some ripple effects on the overall economic growth within Rwanda. National policies and programmes aimed at promoting economic growth, social welfare and political change were heavily influenced by external actors: foreign technical assistants were bolstering weak internal capacity within government institutions; policy consultants and advisors were flying in and out of Rwanda?s capital city, Kigali, to help with the preparation of policy papers and evaluations; a sizable community of expatriate aid workers was present throughout the country. All this necessitates the need to evaluate the far-reaching consequences of aid to Rwanda. (Hayman, 2005).

In Kenya and Tanzania, the Swedish aid on rural development had a positive impact in raising the standards of the poor. To this effect, it would follow that socio-economic development within these nations was registered. Radetzki in Word Bank (2005:258) maintains that in Tanzania, Swedish has provided support for industrial forest planting and care, sawmilling and related activities, technical assistance and village afforestation and this began in mid 1969. One may argues that deforestation was a major challenge which if not controlled could have costed the country to the extent that it was going to be difficult to fight poverty. Poverty alleviation is thus central in order to realise full socio-economic development at all cost. Radetzki in Word Bank (2005:258) further posits that in Kenya soil conservation was successful due to aid from Sweden. In this context, it would follow that there is great need to conserve soil if sustainable agricultural production that fight poverty is to be realised. Howell (2003:418) is of the view that foreign aid from British to Agriculture in Kenya enhanced agricultural research. To this effect, it follows that the impact of foreign aid had positive impact on productivity.

Through research new conventional agricultural practices that are geared towards effective fight against poverty are introduced. Johnston, Hobenand Jaeger (2001:279) report that USA foreign aid support to sub-Saharan Africa registered socio-economic development in that the economic aid has been provided for primary development programmes, food aid, and budgetary support under the Economic Support Fund (ESF) as «security supporting assistance». One may observe that, such foreign aid was quite instrumental in aiding to effective and sustainable socioeconomic development. In proposing effective mechanisms for the provision of foreign aid, Lele and Jain (2001:579) on their analysis of aid to African agriculture, argue that «donors should ensure that their assistance programmes in individual countries successfully combine a long term development strategy with the more pragmatic considerations of day to day economic development. To this end, it follows that, such strategies if intertwined with aid provision will effective anchor socio-economic development of a given nation.

In narrating and tracing the impact of foreign aid and its subsequent role in fighting poverty, Tsikata in Devarajan, Dollar and Holmgrain (2001:47) maintain that «From a state of economic collapse, Ghana?s economy rebounded with sustained economic growth during the first decade of the reform. This stellar performance was accompanied by an exponentional increase in aid inflows from both bilateral and multilateral sources. Against this backdrop, it would follow that the introduction of foreign aid enhanced some economic growth, thus socio-economic development is promoted. In a related study, by Molmgrein (2001:101) of Uganda, it was noted that aid in various forms helped to support the generation and implementation of the policy reforms and Uganda. One may suggest that the various policy reforms may have some bearing on the alleviation of poverty at all cost. In this context aid is perceived to be part of development,

hence the need to have it as nations become geared for the collective effort to fight the global poverty. Similarly, in Zambia, Parkner (2001:1020) reports that aid was pivotal in promoting equitable socio-economic development in the area of agriculture, infrastructure, health and education. One may underscore the fact that if all these areas are funded it follows that the impact of global poverty will be minimised at all cost. As Seers (1988), would argue that development entails eradication of inequality, poverty and unemployment. In advancing debates on the impact of aid to African countries, Dambisa Moyo (2002) presents an argument that sometimes aid in Africa is not working and proposed other mechanisms in order to remove or demystify the issue of aid being classified as «Dead Aid».

To this end this brings us to the relativity nature of foreign aid as put forward by the interactionist view that various subjective meanings are attached to social phenomenon (Ritzer, 1996).