A chilling sense of uncertainty is enveloping Rwanda as its vital international aid hangs precariously in the balance. Major donor countries, including the United Kingdom, the United States, and the European Union, have issued a stark ultimatum to Kigali: end any alleged support for the M23 rebel group in the Democratic Republic of Congo (DRC), or risk devastating cuts to aid that could unravel years of progress and threaten the nation’s ambitious development aspirations.
Rwanda has historically been dependent on foreign assistance to drive transformation. In 2021 alone, it received US$1.3 billion in aid. The current potential repercussions are serious, casting a shadow over Rwanda’s growing economy and its capacity to maintain essential social programs.
At the heart of the crisis are persistent claims that Rwanda is providing active support to the M23 rebels, an armed group that is destabilizing eastern DRC. The United Nations, the European Union, and various Western powers have voiced these accusations, which Rwanda has consistently denied.
Threats to cut support
UK Foreign Secretary, David Lammy, has issued a stark warning that Rwanda may lose its annual global aid, including a significant £32 million in bilateral UK assistance, due to its alleged role in the DRC conflict.
“Rwanda receives over $1 billion in global aid each year, including £32 million from the UK. All of that is at risk when you attack your neighbors,” Lammy stated.
For its part, the European Parliament has urged the European Commission to suspend a memorandum with Uganda on the export of minerals “until the country ceases all interference in the DRC”. It also called on the EU and international financial institutions to “freeze direct budget support for Rwanda”.
This potential withdrawal of aid has sent shockwaves through Rwanda’s political and economic landscape, forcing its government to confront the stark possibility of international isolation.
Rwanda’s response: A move towards self-reliance
In the face of mounting external pressures, Rwanda has adopted a two-pronged strategy by firmly denying the accusations of supporting the M23 rebels while also seeking to strengthen its domestic revenue base to cushion against the impending loss of international aid.
In a proactive step towards economic independence, the Rwandan government has introduced an extensive package of tax reforms that aim to increase financial resources and drive sustained growth.
These sweeping changes, which have been approved by the Cabinet and are set to take effect in the 2024/2025 fiscal year, come at a critical time as fears continue to grow regarding aid cuts from key donor countries amid the ongoing M23 conflict.
Potential impact
While the Rwandan government is promoting a narrative of increased self-reliance, the implications of tax increases and possible aid reductions remain a pressing concern.
Historically, Rwanda has relied on external aid for over 15% of its national budget. A complete severance of Western aid could place immense strain on Rwanda’s public finances, the more so since the USA has already frozen its support via USAID.
