Rwanda illustrates the clear need for predictable funding flows and greater access to world markets, writes Andrew England
From the outside, the tidy appearance of the central hospital in Kigali, Rwanda's capital, gives a welcome impression to visitors in a country recovering from genocide and blighted by poverty. But step inside and the scene is very different.
In the packed paediatric section, two or three children share beds, while worried mothers look on. In the main wards, mosquito nets and peeling paint hang from ceilings, adults share beds and doctors complain about resource shortages in a nation where life expectancy is just 40 years.
In some areas Rwanda is regarded as a success, considering how far it has progressed since the devastating 1994 genocide.
But even after a decade of consistent aid inflows, child mortality rates in 2002 were higher than in 1990 and many in this central African nation are worse off than in the 1980s.
Countries like Rwanda represent the challenges G8 leaders are considering at the Gleneagles meeting, with Africa high on their agenda.
If they are to tackle poverty they are in for the long haul.
Rwanda has a government donors believe they can work with, it has received debt relief under the heavily indebted poor country initiative which should be worth €1.1 billion, and it is one of 18 nations to benefit from last month's agreement by G8 finance ministers to write-off existing multilateral debt.
Yet given the massive tasks facing donors and the Rwandan authorities, the latest debt relief is a drop in the ocean.
The initiative made a significant difference, and should save the country about $48 million a year in debt service payments, three times the health budget, according to finance minister Donald Kaberuka, . Details of the G8 agreement have not been worked out, but it is likely to save Rwanda just $7-$9 million a year.
What Rwanda needs, experts agree, is billions more dollars of predictable funding, in the form of grants rather than loans, sustained efforts to increase productivity, particularly in exports, and greater access to world markets.
"After all these years of economic reforms, the structure of the economy has not changed. The overall peasant-agriculture economy is still the same and therefore social indicators might be improving, but they are not sustainable if foreign aid is cut," Mr Kaberuka says.
Rwanda is an extreme case; devastated by genocide, the tiny, landlocked nation has few resources and one of the world's highest population densities. Its meagre export base is reliant on coffee and tea, and more than 90 per cent of the population ekes out a living as subsistence farmers.
But it also shares similarities with other African countries - high growth rates following initial post-conflict reconstruction that fall to levels well below what is needed for governments to achieve the so-called millennium development goals to halve poverty by 2015.
Rwanda's GDP growth is expected to be 4.5-5.5 per cent for the next several years, compared with the double-digit growth needed to reach the goals, according to the World Bank and IMF. "The challenges are formidable," says Kristina Kostial, the IMF's deputy division chief for Africa.
Development experts argue that part of the reason Africa is burdened with large debts, much of which originated from the World Bank, is because development agencies have been inclined to judge their performance on how much money they lend, rather than results on the ground.
"I don't think that many World Bank staff would argue with that," says one bank official, who acknowledges some of the debt sustainability issues faced today could have been avoided.
Debt is not the only area where donor assistance has had an adverse impact. A Rwandan official complains that the intense focus on HIV/Aids, while well intentioned, has detracted from other key areas, such as malaria.
Mr Kaberuka, while reluctant to criticise the donors keeping his country afloat, also complains of a lack of coherence; rich nations give aid then create barriers to trade, provide grants without long-term planning, and each has its own agenda.
In their defence, development agencies acknowledge they are increasing the use of grants and focusing more on productivity. But many concerns remain, most notably whether rich nations will increase assistance in a sustained manner and remove trade barriers.
In Rwanda, where coffee is the main export earner, raw beans can be exported duty free. But, says Mr Kaberuka, as soon as attempts are made to move along the value-added chain, tariffs are encountered.