'You can count on our financial support,' China assures Kigali.
President Paul Kagame has often said that it is bad to depend on others because they can "disappoint when you least expect it."
Rwanda is currently digesting the truthfulness of that wise counsel, as some of the country's "western friends" threaten to cut or delay financial support over Rwanda's alleged support to a Congolese rebel outfit, the M23.
The Americans started it by blocking US$ 200,000 military aid. The British too said they would withhold US$ 25 million while the Dutch decide to keep theirs worth US$ 6.15 million. Germany also said the US$ 26 million budget support for 2012-2015 would be delayed.
Louise Mushikiwabo, the Minister of Foreign Affairs, thinks this is just a conspiracy. "All indications are that someone is determined to slow us down. [...] It could be part of that sinister plot against Rwanda's progress," she says.
About 47% of the 2012/13 budget that Finance Minister John Rwangombwa read in June is to be funded by donors. But the government appears unshaken - saying with or without aid, life must continue.
At the moment, the administration seems to be counting on Rwanda's "other friends" to plug any gaps in the budget as well as mobilizing more domestic resources.
Defense Minister Gen James Kabarebe was recently at the Chinese embassy, in Kigali as guest of honor during celebrations to mark the 85th anniversary since the Chinese People's Liberation Army was founded.
He told The Rwanda Focus that the country has many friends willing to help and therefore no need to worry. "... Rwanda has many other friends willing to work with us to achieve our development agenda."
While Kabarebe did not mention China explicitly, the Chinese ambassador to Rwanda Shu Zhan told this newspaper later that his country actually plans to increase support to Rwanda. "China always listens to the opinions of all parties, especially the local people. We believe that Africans are good at solving their differences by their own ways and we support their efforts."
He added: "China's assistance to Rwanda mainly focuses on energy, roads, agriculture and agro-industry projects which are in line with Rwandan's needs. We want to help Rwandan people shake off poverty and live a better life."
China says it plans to increase aid and concessional loans this financial year.
This is very good news for Rwanda because the 2012/2013 budget prioritizes energy, roads and agriculture to further reduce poverty.
Energy will drive agro-processing factories and other industries in order to add value to agricultural exports while roads ease transport of goods and services.
If there is one person to whom these threats to cut aid would cause sleepless nights, that must be John Rwangombwa. Rwandans will be looking to him to plug gaps that might be left by aid cuts on the budget he presented in June. But the Minister of Finance and Economic Planning is also unshaken even though 47% of the budget he presented to Rwandans is to be donor-funded. "It is a problem of cash flow and we will manage it through domestic borrowing and delaying some programs," he said last week.
With limited cash flow, it can be guessed that the worst scenario will result in the delay of the promised wage increases in the public sector as well as probably halting allocation of additional resources for both recurrent and capital expenditure to some less endowed districts.
Further squeezing of the budget might see the postponement of allocations of lesser priority since there is a limit to domestic borrowing as well.
Indeed, Rwangombwa will be careful not to over-borrow from the domestic market in order to avoid starving the private sector of funds as banks would rather lend to government than private firms. This can't be encouraged as it would slow down economic activity hence hurting the 8.6% economic growth target.
Rwanda Revenue Authority is likely to come under more pressure to surpass projected revenue collection. "Consistent with our fiscal consolidation policy, we continue to increase our domestic resource mobilization in order to finance an increasing share of our public expenditure and reduce the reliance on external support," said Rwangombwa.
Rwanda is now classified as a country with moderate risk of debt distress meaning that the country is eligible to receive budget loans from the African Development Bank (AfDB) and the World Bank Group.
Last week, the AfDB dismissed reports it had cut funding to Rwanda and proved so by signing a US$ 60 million agreement deal for the construction of Kivu belt road.
On the diplomatic front, Rwanda last week submitted to the UN sanctions committee its rebuttal of allegations contained in addendum to a Group of Experts' report that claims Kigali is backing the M23.
"We systematically responded to every allegation with concrete evidence that proves the accusations contained in the report were unfounded and we are eagerly waiting to see what the final report will look like," Foreign Minister Mushikiwabo said.
The report claims that Rwanda-trained M23 rebel recruits at Kanombe military barracks before deployment to DRC, supplied them with ammunition and fatigues.
But the government says that Kanombe is a garrison-type barracks that comprises living quarters and a referral military hospital that admits civilians that can not serve as a training facility.
"It wouldn't require any form of expertise to find out that Kanombe barracks cannot host the training of recruits or any other force's preparation activity," Mushikiwabo observed.
The UN Security Council is expected to release a report later in November, having considered Rwanda's side.
Editor's note: Just before going to press, it emerged that outgoing Dutch ambassador Frans Makken had clarified that The Netherlands had not actually decided to suspend aid, but that it would only take a decision after hearing Rwanda's reply to the UN report. Speaking on Friday after bidding farewell to President Kagame, he called the response "serious and satisfactory."
As for the other countries that suspended part of their aid, they also all made it clear that those decisions would be retracted if Rwanda's response was convincing.