General objective: contribute to a reinforced integration of environmental objectives in the management of Public Finance; Support Rwanda in its climate trajectory by increasing the scale and impact of climate financial flows.

Main axes:

-          Climate-sensitive public finances that better inform investment, spending and procurement decisions;

-          Stakeholders in the financial system that take into account climate financial risks, in terms of regulation, supervision and investment choices and that contribute to the low-carbon path.

Key themes:

1.      Climate change mitigation and adaptation sensitive budgeting

2.      Climate-sensitive public investment

3.      Sustainable public procurement

4.      Monitoring, reporting, evaluation (MRV)

5.      Sustainable financial systems

Background:

Rwanda, a small, densely populated East African country with low GDP and GDP per capita, reports a low carbon energy mix. The country is particularly vulnerable to the effects of climate change. In addition to the increased risk of food insecurity in a country dependent on rainfed agriculture for both rural livelihoods (62% of the population lives from agriculture) and tea and coffee exports (among the country’s main sources of currency), climate change could lead to health risks and damage to infrastructure. Rwanda is a climate voluntarist: the first developing country to submit a revised national contribution (NDC) in 2021, it aims for carbon neutrality by 2050. The cost of the NDC is estimated at USD 11 billion by 2030 (more than the country’s current GDP).

In December 2022, Rwanda became the first African country to access the IMF’s Resilience and Sutainability Fund (RSF). With an amount of USD 319 million, this RSF financing is backed by a matrix of reforms that will sequence the disbursements. The funding of the RSF also aims to play a catalytic role, by draining more funding towards Rwanda’s climate goals.

This €3 million technical assistance project aims to contribute to Rwanda’s ambitious climate goals alongside the IMF and other donors.

In parallel with this technical assistance, AFD also granted a €50 million program budget financing, with a matrix of indicators, the monitoring of which will be integrated into this technical assistance (budgetary financing of the Climate finance and Investment program budget support program).

This project supports the dynamics of low-carbon development and resilient to the effects of climate change and country policies in this area.

Expected results:

R1: Climate-sensitive budget. The production of a green budget makes it possible to assess and communicate the impact of public spending on the climate.

R2: Sustainable public investment (feasibility and selection): Feasibility studies lead to greater climate sensitivity of public investment projects and public investment projects are evaluated, selected and prioritised taking into account their climate impact. 

R3: Sustainable public procurement. The deployment of sustainable public procurement (SPP) helps align public procurement decisions by limiting environmental impacts.

R4: Monitoring, Reporting and Verification (MRV). A MRV system that promotes climate trajectory control.

R5: Financial systems. Implementation of certain flagship measures of the Sustainable Finance Roadmap (SFR) that Rwanda adopted at COP27 through the deployment of climate finance guidelines and/or regulations by the Rwandan Central Bank (BNR – National Bank of Rwanda) to enable the financial sector (i) to better take climate risks into account and (ii) to improve reporting and transparency on this issue. 

Beneficiaries:

Ministry of Finance (MINECOFIN): Budget Directorate, National Investment Directorate;

RPPA (Rwanda public procurement agency);

Ministry of the Environment;

REMA (Rwanda environment management agency);

Central Bank of Rwanda.

Expertise France will work closely with several french partners to ensure the project’s successful implementation:

-          The Budget Department of the Ministry of Economy and Finance on subject 1 to share experience on the green budget in France;

-          I4CE on subjects 1 and 2 to improve the management of public investments and analyze their impact.  .

-          CITEPA on subject 4 to set up a monitoring system for C02 emissions.