RWANDA

SECOND REVIEWS UNDER THE POLICY COORDINATION

November 29, 2023 INSTRUMENT AND THE ARRANGEMENT UNDER THE
RESILIENCE AND SUSTAINABILITY FACILITY, REQUEST FOR
THE MODIFICATION OF END-DECEMBER 2023
QUANTITATIVE TARGETS, REQUEST FOR REPHASING OF
ACCESS UNDER THE RESILIENCE AND SUSTAINABILITY
FACILITY, REQUEST FOR A STAND-BY CREDIT FACILITY
ARRANGEMENT, AND THE 2023 ARTICLE IV CONSULTATION
––WORLD BANK ASSESSMENT LETTER UPDATE FOR THE
RESILIENCE AND SUSTAINABILITY FACILITY
This update to the RSF Assessment Letter—Rwanda (dated November 28, 2022) highlights
relevant changes that have occurred since the RSF Assessment Letter issuance.

A. Country Vulnerability to Climate Change Including Human,

Social, and Economic Costs for the Country Arising from Climate
Change Vulnerabilities

1. The importance of investing in measures to augment the resilience of Rwanda

was recently underscored by the severe floods and landslides that were experienced in
the Western, Northern and Southern Provinces of Rwanda on May 2 and 3, 2023. The
floods affected 10 of Rwanda’s 30 districts, with 130 deaths reported, many more injured, 5,174
houses either destroyed or damaged, 2,510 houses needing to be evacuated, 8 national and 9
district road sections damaged by the landslides, and 26 bridges damaged by the floods. Early
estimates have shown that total damage and loss is estimated to RWF 215.8 billion (US$187
million) while total recovery needs for the physical damages and economic losses are
estimated at RWF 629.38 billion (US$547.29 million).

B. Government Policies and Commitments in Terms of Climate

Change Adaptation and Priority Areas to Strengthen Resilience

2. The ongoing efforts related to government policies are relevant for climate
change adaptation: The Parliament approved and gazetted the Law Governing National
Parks and Reserves (Law No. 001/2023) in February 2023. The law enables authorized
private persons to manage national parks and nature reserves and convert private land to

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nature reserves. This is a significant step for two reasons. First, it helps reduce the vulnerability of Rwanda’s
degraded landscapes to climate events, such as the flash floods in May 2023, as private sector engagement
in management of parks and nature reserves will inject much needed financing and enhance capacity for
landscape restoration and management. The second reason is the Law helps expand Rwanda’s nature-
based tourism offering, diversifying incomes in rural areas as a consequence of well managed landscapes,
and building resilience in rural livelihoods.

3. The government, under the leadership of MINECOFIN, has launched the process of
developing an integrated Climate Finance Strategy designed to promote institutional coordination
in scaling climate financing, as recommended by the CCDR, 2022. The strategy will cover both private
and public sector financing for climate actions and include an overview of roles and responsibilities, and a
work plan. It will also define a climate finance taxonomy, a project selection process, an information system
to track and monitor financing of climate and environmental protection sensitive projects, and a regulatory
framework for climate-focused financial instruments, such as thematic bonds or Sustainability Linked Bonds
(SBL). The objective is to align financing needs with financing instruments and mobilize private and public
sector financing for adaptation and mitigation actions.

4. Rwanda continues to be a leader in climate action, driving the regional and international
agenda to promote climate change adaptation and mitigation. In September 2023, the Rwanda
delegation, led by the President, participated in the Africa Climate Summit in Nairobi, Kenya. Rwanda is
one of the signatories of the Nairobi Declaration which calls for urgent action by developed nations to
reduce GHG emissions and proposes a new financing mechanism to restructure Africa's debt and unlock
climate finance. The declaration calls for investment to promote the sustainable use of Africa's natural
assets for the continent's transition to low-carbon development and to contribute to global
decarbonization.

C. Government Policies and Commitments in Terms of Climate Change

Mitigation and Priority Areas to Reduce Greenhouse Gas Emissions

5. The government of Rwanda has adopted, through a Cabinet Resolution, a National Carbon
Market Framework to facilitate Rwanda’s participation in carbon markets both within and outside
Article 6 and in non-market approaches. The goal is to provide a new vision and resource mobilization
strategy to support a coordinated and expedited resource mobilization effort focused on the private sector.
The Framework establishes a governance and institutional structure that will guide Rwanda’s participation
in the carbon markets. In addition, the Framework will guide the operationalization of key technical
elements, such as determining specific procedures necessary to participate in carbon markets, including,
among other criteria, the project cycle, requirements to ensure environmental integrity, and processes for
reporting.

The Climate Finance Strategy and INTEGO (Rwanda’s nationally determined contributions (NDC) Facility, for
which a call for public sector proposals was issued in February 2023) will also support delivery of the
government’s mitigation commitments.

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6. However, limited fiscal space as well as the tightening of global financing conditions limit
the government’s capacity to respond to climate-related crisis. While the country has engaged in
ambitious fiscal consolidation to address the high level of public debt (projected at 74 percent of GDP in
2023), it has at the same time deployed fiscal policy measures to mitigate the effect of the ongoing cost-of-
living crisis through increased subsidies allocated for fertilizers, public transportation, and school feeding
programs. Another challenge to the government’s ability to respond to the crisis is the tightening of global
financing conditions. Along with higher commodities prices, the reduction in concessional resources led to
a reduction in reserves, from 5.1 months of imports in 2021 to 4.2 months in 2022. Going forward, the
effective implementation of the National Disaster Risk Reduction and Management Policy, a key
recommendation from the Country Climate and Development Report (CCDR, 2022) adopted in early May,
should strengthen institutional capacity to manage natural hazards. The Policy and the actions included
cover fundamental disaster risk management system strengthening. The recommendations and the actions
that the Policy identified to tackle mitigation and adaptation challenges are built on solid analytical
underpinnings. They are in line with the Sendai Framework for Disaster Risk Reduction (SFDRR), which is a
global framework for disaster risk management adopted by most countries and considered as good
practice.

D. Any Other Challenges, Including Inter or Cross-Sectoral, Policy

Reversals or Institutional Capacity Issues, to be Addressed to Make Progress
in Tackling Climate Risks and Any Ownership/Policy Related Issues

7. Mobilizing financing for the proposed investments in Rwanda’s 2020 NDC, mentioned in
the November 2022 Assessment Letter (Annex 1), remains an important challenge. The most recent
efforts to tackle this issue include, as mentioned above, the adoption by the cabinet in October 2023 of a
National Carbon Market Framework and the preparation, under the World Bank Development Policy
Financing operation, of a National Climate Finance Strategy. The ongoing efforts to systematically assess
fiscal risks from climate change and mainstream the appraisal of climate change projects into the public
investment management system, supported by the RST, are also likely to support meeting Rwanda’s
climate commitments.

E. WB Engagement in the Area of Climate Change

8. The World Bank engagements mentioned in the November 2022 Assessment Letter are still
ongoing. Having supported the design and operationalization of Ireme Invest, technical assistance on
climate finance continues with a focus on innovative financing instruments, which has expanded to
dedicate greater attention to supporting Rwanda’s ambitions in the carbon market. Through the Additional
Finance–Access to Finance for Recovery and Resilience Project (AFIRR) (P179999), the World Bank and the
Rwanda Development Bank (BRD) launched a Sustainability Linked Bond (SLB) to increase mobilization of
private capital needed for climate and development priorities. BRD's first issuance was successfully
completed in October 2023. With PROGREEN financing, the World Bank is providing technical assistance
for REMA and related ministries, districts and other government agencies (MDAs) to deliver on the
country’s NDC commitment on landscape restoration. The Technical Assistance is supporting the
formulation of a strategic government program focused on landscape management and natural

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asset-based economic activities. In addition, important progress has been made in the new Private Sector
Green Growth Development Policy Financing series that incorporates climate measures, through unlocking
climate finance, and improved management of national parks, nature reserves and buffer zones, and the
first operation is expected to be approved by the World Bank’s Board in December 2023. In addition, World
Bank approved financing (US$50 million IDA credit and US$12 Million Grant from the Global Partnership
for Sustainable and Resilient Landscapes (PROGREEN)) for the Volcanoes Community Resilience (VCRP)
Project in October 2023. The project development objective is to reduce the risk of flooding, strengthen
watershed management and improve livelihoods of people in the project area. VCRP is set up to serve as a
platform for the Government of Rwanda to mobilize financing for activities focused on reducing flood risks
and improving livelihoods in the Volcanos region. The European Investment Bank has committed to
providing US$110 million, and additional financing is expected from the Nordic Development Fund, the
Climate Investment Fund, and the Global Environment Facility.

9. In addition, The World Bank approved, on November 28, the "Accelerating Sustainable and
Clean Energy Access Transformation” (ASCENT) program. The program will boost access to sustainable
and clean energy for 100 million people in up to 20 countries across Eastern and Southern Africa, including
Rwanda, over the next seven years. The financing approved for Rwanda is US$100 million.

10. The World Bank has also continued its efforts to disseminate climate-related knowledge. In
the forthcoming Country Economic Memorandum (CEM) several chapters reflect the importance of
integrating climate considerations in the implementation of sector policies and investments. The CEM
includes recommendations for policy reforms that can boost overall climate resilience (with a special
attention to resilience of Rwanda’s natural and urban landscapes) and advance the country’s low-carbon
transition.

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Annex I. Resilience and Sustainability Facility––World Bank

Assessment Letter on Rwanda
November 28, 2022

A. Country Vulnerability to Climate Change Including Human, Social,

and Economic Costs

1. Rwanda is vulnerable to increasingly frequent climate-induced natural disasters as well as to

rising temperatures and changing rainfall patterns. The University of Notre Dame Global Adaptation
Initiative (ND-GAIN) Index, ranks Rwanda as 124th out of an 182 countries with respect to the country’s
vulnerability to climate change and other global challenges as well as its readiness to improve resilience.1
Rwanda’s vulnerability to climate change reflects the economy’s dependence on climate sensitive sectors
such as nature-based tourism, rainfed agriculture, extractives, and other weather-sensitive industries, which
in 2021 accounted for an estimated 65 percent of employment, 45 percent of GDP, and 40 percent of
exports.2 The Rwanda Country Climate and Development Report (CCDR, 2022) estimates that Rwanda’s
annual GDP during 2022–50 could be between 0.6 and 2.6 percent lower on average, depending on the
climate scenario, than in a baseline with no climate change, and that annual deviations could be
5.0-7.0 percent lower than the baseline in some years.3 Droughts have historically had the widest reach
among natural disasters, affecting as much as 12 percent of the population.4 Rwanda, also faces floods,
landslides, and rainstorms. For example, the 2018 floods caused damage to physical assets valued at
Rwandan franc (RWF) 201 billion and economic losses of RWF 21 billion (2.4 percent and 0.3 percent of
GDP, respectively).5 Nearly 52 percent of the Rwandan population lives below the international poverty line.
Poor households and communities have little capacity to manage climate risks, including the health risks
that are likely to increase with climate change.

2. Rwanda contributes only 0.003 percent to global greenhouse gas emissions and emitted
5.34 MtCO2e in 2015. Rwanda’s per capita emissions are about 0.5 tCO2e, which is around one-fifth of the
regional average and just one-twelfth of the world average. Rwanda also has a relatively low emissions
intensity—around 0.6 tCO2e per 1000 2015 US$ GDP. Emissions from livestock dominate the emissions
profile of Rwanda. Livestock, agriculture, and land use together account for 74 percent of total emissions.

1 GoR. 2019c. Rwanda Rapid Post Disaster Needs Assessment (PDNA). Kigali: Republic of Rwanda as cited in World
Bank Group. 2022. Rwanda Country Climate and Development Report. International Bank for Reconstruction and
Development/The World Bank.
2 World Bank Group, Rwanda Country Climate and Development Report, 2022. World Bank staff estimates using 2021
national accounts, employment, and balance of payments data from the Bank of Rwanda and the National Institute
of Statistics Rwanda.
3 World Bank Group, Rwanda Country Climate and Development Report: Technical Annex, 2022. Climate scenarios
incorporate expected changes in rainfall and temperature associated with RCPs 2.6, 4.5, and 8.5 (ensemble averages)
and with wetter, hotter, and drier variants of RCP8.5. Hot and dry conditions cause the largest losses.
4 According to the data from the Emergency Events Database (EM-DAT), the 1996 drought affected 12 percent of the
population.
5 Republic of Rwanda, Ministry in Charge of Emergency Management (MINEMA), Rwanda Rapid Post Disaster Needs
Assessment Final Report, January 2019.

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Energy, waste sector, and industrial processes and product use (IPPU) accounts for 18 percent, 8 percent,
and 1 percent of total emissions.6

B. Government Policies and Commitments for Climate Change Adaptation

and Priority Areas to Strengthen Resilience

3. Rwanda is integrating its efforts to address climate change with development goals given its
a growing rural population, high incidence of poverty, lack of universal access to basic services, and
limited private sector engagement. Food security in Rwanda lies well below the average for low-income
countries, mainly due to challenges in food affordability and availability, and is further threatened by
climate change. With nearly 40 percent of the population living in informal settlements, access to water and
sanitation, health services, and energy is limited, and informal settlements are likely to expand as the
country seeks to promote rapid urbanization. Rwanda needs to modernize agriculture, manage
urbanization, promote competitive domestic enterprises, strengthen regional integration, and invest in
human development.7

4. Over several decades, Rwanda has progressively strengthened its climate commitments and
put in place a legal, policy, and strategic framework to build resilience against climate change.
Rwanda’s Vision 2050 and National Transformation Strategy 2017–24 provide the foundation by
mainstreaming sustainability and resilience into productive sectors and government planning.8 Rwanda’s
Nationally Determined Contributions (NDC) presents details regarding specific adaptation and mitigation
actions, as well as goals and targets. The country’s 2020 updated NDC presents the interventions in more
detail, specifying the government institution that is responsible, the timeframe for implementation, and the
estimated costs. The updated NDC includes 24 priority adaptation interventions in the water, agriculture,
land and forestry, human settlements, health, transport, and mining sectors. Interventions in the agriculture
sector are aimed, among others, at sustainable land-use management and climate-resilient crops, resilient
livestock, and value addition facilities and technologies. Other interventions in the NDC will improve forest
management, promote afforestation, and reforestation and, in the area of water management, restore
wetlands, build water storage, increase efficiency of water use, and introduce conservation practices.

5. The Ministry of Environment leads the development of climate change strategy and policies
at the central government level.9 Local governments are responsible for the application of laws and
regulations related to the protection of the environment within their jurisdiction. Rwanda’s National Fund
for Environment (FONERWA) has, with the Development Bank of Rwanda, mobilized significant funding for
climate action, including through the Rwanda Green Investment Facility, which recently mobilized
US$104 million to support the private sector in developing a climate-friendly economy.

6 World Bank Group. 2022. Rwanda Country Climate and Development Report. International Bank for Reconstruction
and Development/The World Bank.
7 Ibid.
8 The Green Growth and Climate Resilience Strategy (2011, revised in 2021), Rwanda’s Nationally Determined
Contribution (NDC) (2016, updated in 2020), and the National Environment and Climate Change Policy (2019) are
other core documents.
9 Rwanda adopted in 2011 the Rwanda Green Growth and Climate resilient strategy (GGCRS).

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C. Government Policies and Commitments for Climate Change Mitigation

and Priority Areas to Reduce Greenhouse Gas Emissions

6. Although the focus of Rwanda is on adaptation, the country is also committed to a

low-carbon transition. Rwanda’s 2020 NDC presents an estimated total emissions reduction potential of
around 4.6 million tons of carbon dioxide equivalent (MtCO2e) in 2030, or a 38 percent reduction against
the projected business as usual (BAU) emissions in the same year of 12.1 MtCO2e. 10 To achieve the
emission reduction commitment, the government has prioritized measures in energy, industrial processes
and product use, waste, and agriculture. Investments in soil conservation, composting, and animal
husbandry would provide almost half of this reduction (2.2 MtCO2e), as agriculture and land use are
dominant sources of Rwanda’s current GHG emissions.11 In energy, the aim is to achieve 1.5 MtCO2e
reduction through increased use of hydropower, efficient cook stoves, motor vehicle standards, and the use
of solar power in irrigation and mini grids. In addition to these measures that reduce emissions of GHGs,
Rwanda is committed to protecting forests, which remove and store carbon, further offsetting Rwanda’s
GHG emissions.

D. Other Challenges and Opportunities

7. Mobilizing financing for the proposed investments in Rwanda’s 2020 NDC will be
challenging. Although all actions in the NDC support achieving Vision 2050’s development goals, the
government estimates that these actions will cost approximately US$11.0 billion, of which US$4.16 billion
will be unconditional (with 52 percent for adaptation and 48 percent for mitigation) and US$6.89 billion will
be conditional (with 47 percent for adaptation and the rest for mitigation). To manage these costs,
additional fiscal space is needed, through increased spending efficiencies (as also outlined in the
forthcoming World Bank Public Expenditure Review) and spreading out of planned investments over a
longer timeframe.12 There is also a need for the private sector to share the burden of investing in climate
resilience and the low-carbon transition, such as through public-private partnerships or joint management
of protected areas.

8. Refinements to public investment management systems can support meeting Rwanda’s

climate commitments. Potential areas of action include assessing systematically fiscal risks from climate
change; mainstreaming into the public investment management system the appraisal of projects’ climate
change and natural disaster vulnerabilities, as well as their potential contributions to reducing damages and
losses from climate change; and introducing climate change-related rules into public procurement
regulations.

10 This reduction potential includes an unconditional target of 1.9 MtCO2e plus an additional conditional reduction of
2.7 MtCO2e, which would require new financing and assistance.
11 The government estimates that agriculture accounted for 49 percent of GHG emissions in 2018, followed by energy
(35 percent) and waste management (14 percent). Government of Rwanda, Rwanda’s First Biennial Update Report
Under the United Framework Convention on Climate Change, December 2021.
12 World Bank Group. 2022. Rwanda Country Climate and Development Report. International Bank for Reconstruction
and Development/The World Bank.

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9. Developing a green finance market as part of the broader capital market development
effort in Rwanda can also help mobilize financing. This will require actions by financial regulators and
supervisors to implement environmental, social, and governance standards in operations of Rwanda’s
financial institutions as well as developing a pipeline of bankable and monitorable green projects.
Introducing new financial products would also require new technical knowledge, e.g., to develop crop and
livestock insurance products tailored to meet the needs of smallholders. 13

E. World Bank Engagement

10. The World Bank has an active portfolio of financing and technical assistance that is helping
Rwanda implement its climate commitments.
• Active operations: The Second Rwanda Urban Development Project (P165017) includes
flood management. The Energy Access and Quality Improvement Project (P172594),
Commercialization and De-Risking for Agricultural Transformation Project (P171462)
contribute to addressing climate change through their focus on urban resilience, energy
efficiency, and increased use of irrigation.
• Operations under preparation: The World Bank is preparing the Rwanda Urban Mobility
Project (P176885), which aims to boost climate resilience in the transport sector. The
Volcanoes Community Resilience Project (P178161) will reduce flood risks and improve land
management through protected area expansion and landscape management. A planned
new Development Policy Financing series is also expected to support policy reforms that
boost climate resilience and advance the low-carbon transition.
• Analysis and technical assistance: The CCDR provides policy- and investment-related
recommendations on climate change. The World Bank has been supporting the
establishment of the Rwanda Green Investment Facility and will continue to support the
government to mobilize climate and nature-based financing through targeted financing
options (with a focus on private sector financing). The World Bank also continues to provide
technical assistance on climate finance under the Green Growth and Climate Resilient
Development Project (P169151).

13 World Bank Group. 2022. Rwanda Country Climate and Development Report. International Bank for Reconstruction
and Development/The World Bank.

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