RWANDA

Rwanda is a democratic republic headed by the president who is the head of State (article 98 of the Constitution) and the commander in chief of defence forces. Pursuant to the Constitution of the Republic of Rwanda of 2003 (revised in 2015), specifically in its article 101, the president is elected for a term of five years for a maximum of two terms. The country has a bicameral parliamentary system made up of the Senate and the Chamber of Deputies.

Local governance is enshrined in Chapter 1 of the 2003 Constitution, which states in Article 6 that “public powers are decentralised at local administrative entities in accordance with provisions of law”. The main governing legislation is the Organic Law 29 of 2005, which determines the administrative entities at municipal level and establishes the number, boundaries and structure of subnational governments, namely the districts and the City of Kigali.

An important political feature of the 27 districts with legal personality and the City of Kigali is their elected councils and mayors, and the preparation of their own budgets. According to the Law 22/2019, however, the three districts of the city of Kigali (Kicukiro, Gasabo and Nyarugenge) have no legal personality like other districts.

Under the districts are sectors, cells and villages. The cell is the smallest politico-administrative unit of the country. Its main responsibility is community mobilisation. The local government law stipulates that at the village level, all village residents are members of their village council. Cell council members are directly elected by universal suffrage of the cell residents. Representatives are then indirectly elected from the cell council members to the sector council, which then in turn indirectly elects a representative to the district council. Local government elections began in 2001, the term of office for local government elected council is five years. The latest elections were held in November 2021 based on the Local Government Law 065/2021 of 9 October 2021.

The government of Rwanda adopted a phased approach to implementing national decentralisation policy starting from the year 2001. The first phase (2001-2004) focused on institutionalising decentralised governance by articulating the policies and legal frameworks, as well as putting in place the necessary administrative structures, systems and mechanisms. The second phase (2005-2009) focused on enhancing public service delivery through the decentralisation of public services from the central government to the districts. In the third phase (2011 to date), the focus has been on fiscal decentralisation to promote local development, accountability and strengthen the capacity of decentralised local governance entities - district, sector, cell and village, to better implement citizen-centred programmes. The current decentralisation policy, approved in October 2021, has the purpose and objective to “deepen and sustain citizen-centred governance and promote equitable local development for socio-economic transformation”.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
27 districts + the City of Kigali
Average municipal size: 431 733 inh. (population divided by 27 districts + the 3 districts of the city of Kigali)
28			28

[1] Name and number of sub-municipal entities:
416 sectors (imirenge)
2 148 cells
(utugari)
14 838 villages (imidugudu)

OVERALL DESCRIPTION: At the decentralised level, the country is made up of 27 districts with autonomous status. The three districts in the City of Kigali (Kicukiro, Nyarugenge and Gasabo) are not included in the total number of districts, as they do not have legal status like other districts.

The Republic of Rwanda is divided into four provinces (Intara), which serve as a coordinating organ of the central government to ensure efficiency and effectiveness in local government planning, execution and supervision of the decentralised services. Therefore, the provinces are not identified as local governments, but as deconcentrated state administration at regional level.

MUNICIPAL LEVEL: The Southern Province has eight districts, the Eastern and Western Provinces have seven each, and finally the Northern Province has five districts. The City of Kigali comprises of three districts that have no legal personality. The executive head of the three districts within Kigali City are appointed by the central government. Local executives are responsible for the overall supervision, guidance, coordination and monitoring of national policy implementation, spatial and development planning, and economic development in the constituent districts.

Apart from the Capital of Rwanda, Kigali, there are satellite and secondary cities. The eight secondary or peripheral cities are Nyagatare, Musanze, Rubavu, Rusizi, Huye, Karongi, Kirehe,and Kayonza. Located on an external belt near the borders, they serve the peripheries of the country and play an important role in facilitating cross-border trade. They are developing rapidly as outer growth poles of 300 000 – 650 000 people. Three cities (Rwamagana, Muhanga, and Nyamata/Bugesera) are Satellite cities of 800 000 -1 million; people; they have the potential to grow faster than the secondary cities.

The responsibilities of subnational governments are determined by the Local Government Law 065/2021 of 9 October 2021 governing the districts. Article 3 provides for the organisation and functioning of a district with legal personality and its decentralised administrative entities.

Article 8 clearly defines 13 responsibilities of a district, of which the key ones are: (i) to put in place development strategies; (ii) to establish departments of a district, instructions that govern them and determine their responsibilities; (iii) to monitor the implementation of recommendations contained in the report of the auditor general of State finance; (iv) to adopt the budget of a district; (v) to determine charge rates levied in a district in accordance with the law; and (vi) to approve funds to be invested in enterprises or companies in which a district intends to have shares in accordance with relevant laws.

Article 21 indicates the responsibilities of the bureau of the district council: (i) to prepare, convene and chair the meeting of the district council; (ii) to monitor the implementation of the decisions of the district council; and (iii) to perform such other duties as may be assigned by the district council.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Municipal level
1. General public services (administration)	Development planning and management; Administrative services (marriage, birth, etc.); Voter registrationPublic buildings and facilities
2. Public order and safety	Community policing; Fire and rescue services (jointly with the Ministry of Internal Affairs)
3. Economic affairs / transports	Employment services and job information; Local roads, park spaces, urban transport, local tourismElectricity grid expansion and connections; Markets, abattoirs, storage space, warehouses
4. Environment protection	Parks & green areas, waste and water management, Sewage systems, Street cleaning, Tree planning, Construction of dams, Greening and beautification
5. Housing and community amenities	Construction/renovation of public housing; Spatial planning, land use and building regulation; Distribution of drinking water, public lighting
6. Health	Primary healthcare (medical centres) and secondary healthcare (district hospitals); preventive healthcare
7. Culture & Recreation	Sports, libraries, local museums
8. Education	Pre-primary, primary and secondary education
9. Social Welfare	Social protection; support to vulnerable groups (extremely poor and historically marginalised)Orphanages, centres for children in streets, welfare homes

Scope of fiscal data: 27 districts and the city of Kigali

Ministry of Finance and Economic Planning (MINECOFIN)

Availability of fiscal data: Medium

Quality/reliability of fiscal data: Medium

GENERAL INTRODUCTION: Rwanda has implemented progressive fiscal decentralisation. As part of the revised Fiscal and Financial Decentralisation Policy adopted in 2011, the main subnational government finance legislation includes Presidential Order 25/01 of 9 July 2012 establishing the list of fees and other charges levied by decentralised entities and determining their thresholds, the Law 75/2018 of 7 September 2018 determining the sources of revenue and property of decentralised entities, Ministerial order 008/19/10/TC of 16 July 2019 determining tax procedures applicable to collection of taxes and fees for decentralised entities, Ministerial Order 007/19/10/TC of 16 July 2019 regulating investment undertaking by a decentralised entity, and the prime minister’s Order 004/03 of 16 February 2021 determining the institution in charge of assessment and collection of taxes and fees on behalf of decentralised entities.

Subnational government expenditure by economic classification
2019/20	Dollars PPP / inhabitant	% GDP	% general government (same expenditure category)	% subnational government
Total expenditure	140	6.3%	18.2%	100.0%
Incl. current expenditure	78	3.5%	19.3%	55.5%
Compensation of employee	51	2.3%	56.5%	36.6%
Intermediate consumption	11	0.5%	18.6%	7.7%
Current Social expenditure	4	0.2%	8.2%	3%
Subsidies and current transfers	10	0.5%	9.1%	7.1%
Financial charges (in. interest)	0	0%	0.2%	0%
Other current expenditure	2	0.1%	2.4%	1.1%
Incl. capital expenditure	62	2.8%	17%	44.5%
Capital transfers	27	1.2%	9.3%	18.9%
Direct investment (or GFCF)	36	1.6%	44.9%	25.6%

EXPENDITURE: In FY 2019-2020, subnational government expenditure accounted for 18.2% of general government expenditure and 6.3% of GDP. Current expenditure represented 55.5 % of total subnational government expenditure, with 36.6% used to pay the compensation of employees and 7.7% spent on Intermediate consumption. The amount spent under subsidies and current transfers combines current, social and financial expenses in support of the communities.

Capital expenditure amounted to 44.5% of total expenditure (with capital transfers accounting for 18.9% and direct investment for 25.6%).

DIRECT INVESTMENT: Local governments play a moderate role in direct investment due to the limited own revenue budget. The central government plays a vital role in local government investments by allocating budget approved by the local government councils. The funds allocated to investments by the central government are routed through the Local Administrative Entities Development Agency (LODA). LODA is a government fund under the supervision of the Ministry of Local Government (MINALOC). It was established by Law 62/2013 of 27/08/2013, which determines its responsibilities, organisation and functioning. It manages all local government investments and the national budget and development partners provide its financial resources.

Key local government investment areas include education (schools), health (health facilities), general public services (sector and cell administration buildings) as well as water and road facilities.

Although the Law 75/2018 of 7 September 2018 that determine the sources of revenue and property for decentralised entities mentions loans as one of the local government revenue sources for investment, only a few local governments (Rubavu and Nyagatare Districts and the City of Kigali) have secured loans from local financial institutions to boost local investments.

Subnational government expenditure by functional classification
2019/20	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure by economic function	139	6.3%	-	100.0%
1. General public services	26	1.2%	10.4%	19.0%
2. Defence	1	0.1%	4.7%	1.0%
3. Security and public order	-	-	-	-
4. Economic affairs/transports	29	1.3%	28.8%	21.0%
5. Environmental protection	3	0.1%	97.3%	1.9%
6. Housing and community amenities	16	0.7%	94.3%	11.5%
7. Health	12	0.6%	26.7%	9.0%
8. Recreation, culture and religion	2	0.1%	38.3%	1.4%
9. Education	37	1.7%	63.0%	26.6%
10. Social protection	13	0.6%	68.2%	9.3%

COFOG data are available for general government but not for local governments. However, the Ministry of Finance issues annual earmarked transfers guidelines to decentralised entities (i.e., districts) by programme. The programmes broadly follow COFOG classification and allow reconstruction of local government expenditure by economic function, at least with respect to the earmarked transfers.

The table above is likely to underestimate expenditure for general public services because the recurrent block grant accounts for the bulk of the difference between the total expenditure and the earmarked transfers.

The results show that most subnational government spending goes to education (26.6%). Economic affairs and transport (21%) and housing and community amenities (11.5%). The social protection and health sectors receive sizeable financing (9.3% and 9%), whereas environment protection and recreation, culture and religion were funded at minimum ratio (1.9% & 1.4% respectively). It is worth noting that social protection programmes are specifically implemented at local government levels.

Subnational government revenue by category
FY 2019-2020	Dollars PPP / inhabitant	% GDP	% general government (same revenue category)	% subnational government
Total revenue	138	6.3%	40.3 %	100.0%
Tax revenue	4	0.2%	1.4%	3.1%
Grants and subsidies	123	5.6%	-	88.7%
Tariffs and fees	8	0.4%	-	5.8%
Income from assets	3	0.2%	-	2.5%
Other revenues	0	0.0%	-	0.0%

OVERALL DESCRIPTION: Since 2001, the government of Rwanda has been implementing different programmes in support of fiscal decentralisation, which included the devolution of funds and functions from central to local government. In 2016, the Rwanda Revenue Authority (RRA) was given a mandate of collecting local revenues on behalf of decentralised entities and they signed a memorandum of understanding in a bid to have effective revenue collection.

In the fiscal year 2019-2020, total local government revenue was estimated at USD 138 PPP per inhabitant. The main source of local government funding is grants and subsidies from the central government, particularly earmarked grants: grants and subsidies account for almost 89% of subnational government revenue. Local governments have the ability to raise own-source revenues. In accordance with the Law 75/2018 of 07/09/2018 determining the sources of revenue and property of decentralised entities, these include a variety of local taxes and fees from the provision of administrative and other decentralised services, fines, government subsidies, etc.

TAX REVENUE: Adequate local revenue collection remains a challenge including the mindset of taxpayers in regards to tax payment. The three main taxes are the immovable property tax, the trading license tax and the rental income tax.

As part of a national commitment to reform local taxation, in August 2018, parliament passed a law amending the sources of revenue and property of decentralised entities, mostly emanating from the so-called property tax. It replaces the old law 59/2011 enacted in December 2011. The key change included an increase in tax rate (to be set by the district council) for residential buildings with tax exemption for buildings used by owners as their residence. The new law also introduces other measures to improve property tax:

- Efficient land use: The law provides a standard plot size corresponding to each type of building to guide the land tax rate to pay. This tax will increase by 50% for each extra square meter beyond the set standard rate.

- Promotion of commercial and industrial buildings: The law will support urbanisation policies in place by providing preferential tax rates on commercial buildings. It will also promote industrial and SME development by providing special tax rates for industrial buildings to make them competitive on both regional and international markets. In addition, SMEs will receive a two-year tax trading license exemption upon establishment.

- Rental Income tax: Under the new law, the income threshold reserved for maintenance and upkeep of rented property (which is not taxed) has increased from 30% to 50%. For rented property financed through loans, actual interests will be subtracted while calculating taxable value.

GRANTS AND SUBSIDIES: In FY 2019-2020, grants and subsidies made up 88.7% of total revenue, of which capital grants represented 66.4%, current grants 11%, and other specific grants up to 22.6%. To ensure equitable budget allocation among districts, an equalisation mechanism for budget allocation to local governments takes into account three aspects, namely population of the district, size of the territory and poverty levels. Capital grants are earmarked and leave very limited space for local governments to decide on their priorities.

Transfers from central to local governments are composed of the following:

- Current block grants – local administrative budget support funding mainly aimed to bridge the fiscal gap in the recurrent budget of eligible entities. It helps to finance administrative expenses, including salaries, running costs, and supervision of activities to ensure service delivery. The grant is formula-based.

- Earmarked grant transfers – these are project-tied grants for each delegated function. According to the revised Fiscal & Financial Decentralisation Policy (MINECOFIN, 2011), the exact amount for earmarked funds in each sector is determined by the relevant line ministry or budget agency in charge of the specific sector, in consultation with local governments and approved by the Minister of Finance. The delegating line ministry regulates the transfer mechanisms, reporting requirements and the formula for allocation.

- Capital block grants – intended to assist districts in undertaking local development projects. Currently, this grant is not applied as it has been subsumed by the common development fund/ local investment projects financing.

- Common development fund – provided under article 12 of Law 62/2013 of 27 August 2013 to LODA for disbursement to districts to assist them in their development programmes. The fund comprises at least 10% of the central government’s domestic revenues and funds provided by development partners. Allocation of funds to districts is formula-based.

OTHER REVENUE:The law determines the tariffs and fees that can be established by the City of Kigali and the districts. In the fiscal year 2019-2020, they could derive fees from trading license, public cleaning, transfer of land title by voluntary sale, transport of materials from quarries and forests, market fees, payment for certificate of land ownership, birth and death certificate fees, fines, certificate for replacement of national identity card, construction permit and measurement of land plot in villages located in rural areas, fees on identification umber of a cow and other fees, whose certificate cost have not been determined. It is worth noting that taxable activities vary from one district to another depending on the nature of its own income generating activities and services required by the population.

ⓘ No detailed data available for this country

FISCAL RULES: Fiscal decentralisation is built on key principles that include matching funding with responsibilities, equity, transparency, accountability, incentives and enforcement. According to the Organic Law 12/2013/OL of 2013 on State finances and property, any borrowing made by public institutions is subject to prior approval by the minister of finance. The said organic law and associated ministerial orders give clear basis on how government funds are managed, spent and reported for accountability and transparency purposes. Furthermore, both central and local government institutions are governed by the Law 62/2018 of 25 August 2018 on public procurement to strengthen transparency and accountability in the management of public funds.

The 2021 revised fiscal decentralisation policy states that once a local government receives an indication of the amount to be received from the central government (earmarked and block grant transfers), it is responsible for matching the budget ceiling from the Ministry of Finance and Economic Planning (MINECOFIN) with priorities, while respecting the conditions attached to the transfers in terms of earmarking to specific intervention areas.

During budget execution, local governments have to respect all financial management procedures as specified by MINECOFIN, and provide regular reporting on budget execution and performance achieved, in line with the monitoring framework specified by the various line ministries in collaboration with MINECOFIN. Where transfers are affected on a quarterly basis, proper reporting may be a pre-condition to receive a next grant instalment.

DEBT: The local government councils have the authority to borrow to finance development projects. The regulation on local government bonds is not yet established. However, on the basis of Law 75/2018 of 7 September 2018, the City of Kigali and some districts have started to borrow from local banks.

TERRITORIAL MANAGEMENT OF THE CRISIS: In March 2020, when the World Health Organisation (WHO) declared COVID-19 a global pandemic, the government of Rwanda decided to handle the pandemic via a multi-sectoral approach. A COVID-19 National Steering Committee was established on 9 March 2020, chaired by the prime minister, right before Rwanda confirmed its first case of COVID-19 on 14 March 2020. A couple of days after the first few cases, schools and churches were closed, and mass gatherings were prohibited. On 22 March 2020, total country lockdown was imposed, which later was eased on 4 May 2020. During this time, a series of preventive measures were put in place, including communication on the mode of transmission of COVID-19 and precautionary measures to be undertaken.: To ensure effective coordination of all stakeholders at national and subnational levels, public health operational emergency centres/command posts were established at national, provincial, and district levels. The overall coordination mechanism is a central government taskforce, which relies heavily on the leadership of the COVID-19 National Steering Committee.

Development partners (DPs) were coordinated via various coordination mechanisms such as the development partners coordination group (DPCG), the health sector working group (HSWG); head of cooperation/DP group and health DPs. The revised COVID-19 response plan covering the period January-December 2021 addressed the gap in the previous plan of communication between the said coordination mechanisms.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: At the local government level, the district command posts were responsible for containing COVID-19. Emergency measures included the spreading of protection messages through loudspeakers mounted on pick-up trucks driving around the neighbourhoods. Youth volunteers were also mobilised to guide people in public areas such as market places and bus stop stations to adhere to Ministry of Health guidelines.

Local governments, in collaboration with some non-state actors, put up signage in public places, especially in the City of Kigali, about measures against COVID-19. In addition, subnational governments provided families in need with basics commodities such as foodstuffs and enforced penalties to businesses and individuals that did not respect COVID-19 measures.

Although digital payments had already been there prior to COVID-19, the coverage was limited to a few interested individuals. Local government leaders helped by youth volunteers sensitised market traders and buyers to transact via digital payments instead of making payments using bank notes.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The outbreak of COVID-19 has had far-reaching impact on economic and business activities at subnational level, where almost all activities were suspended. In addition, local government services such as veterinary and agriculture extension services and respective value chains were badly affected and this led to disruption of production in many areas. In most urban and peri-urban areas, subsistence casual workers, in particular in the informal sector (truck off-loaders, masons and masonry aids, small vendors, waivers, handcrafts producers, hawkers, cyclists, motor taxis operators, etc.) lost their employment opportunities. The consequences of economic activities breakdown have been a reduction in local revenue collection.

According to the report of the technical forum for local government officials and stakeholders on revenue collection targets and local public finance management, five out of 27 districts could not achieve their revenue collection targets in the July–November 2020 semester. A technical meeting held on 27-28 May 2021 reported that one district achieved its revenue collection target, six districts exceeded their revenue collection targets and the remaining twenty districts were not able to achieve their targets in the FY 2020/2021.

In view of the above, different reforms geared towards broadening the tax base were put in place and the Rwanda Revenue Authority (RRA) undertook increased revenue mobilisation strategies that include online tax payment, extension of taxes payment deadlines, regular updates and reminders to the public of tax deadlines and procedures of tax payment.

ECONOMIC AND SOCIAL STIMULUS PLANS: The government of Rwanda formulated a COVID-19 Economic Recovery Plan, which comprises two major components: (i) the Economic Recovery Response and (ii) the Social Protection Response and Recovery Plan. The plan has five priority areas, namely, (i) health spending to contain the epidemic, (ii) scaling up social protection, (iii) ensuring food self-sufficiency, (iv) support for businesses and protect jobs, and (v) ensuring a coordinated multi-sectoral response of government to quick start and boost economic activity.

Following an initial allocation of RWF 100 billion (~USD 294 PPP million) in June 2020 for two years for the operation of the Economic Recovery Fund (ERF), the authorities approved an additional RWF 350 billion (~USD 1 PPP billion) in March 2021. The fund aims to support businesses, boost jobs and reduce poverty. The target businesses include tourism and hospitality, manufacturing, transport and logistics as well as small and medium enterprises linked to domestic and global supply chains.

The COVID-19 Social Protection Response and Recovery Plan (SP-RRP) helps to mitigate negative effects on the vulnerability of rural and urban households by providing a packaged approach addressing different needs related to the COVID-19 crisis. The main intervention components are: (i) immediate relief response for the most vulnerable and affected households by providing classical social protection measures and food supply; (ii) economic relief response by providing private asset grants, promoting labour intensive infrastructure projects, granting access to finance for poor households; and (iii) accompanying measures aiming to ensure access to basic services such as health, education, shelter for the most affected households.

A total of RWF 18.7 billion (~USD 55 PPP million) was spent in FY 2019/20 on social protection and agriculture-related expenditures. This amount was increased by RWF 70 billion (~USD 200 PPP million) in FY 2020/21.