(The Economist): A NEWCOMER has arrived on Lake Kivu, the deep and dangerous body of water that divides Rwanda on the east from the Democratic Republic of Congo to the west. A high-tech barge weighed down with gleaming steel tanks sits in the bay at Kibuye, on the Rwandan shore. Nearby, a corridor of red buoys marking the path of a new pipeline stretches into a waterway criss-crossed by fishermen in wooden boats.
Soaked in carbon dioxide and methane from surrounding volcanoes, Kivu is one of the world’s most explosive lakes. If its gases were suddenly released, the explosion (a “turnover”, in geology-speak) could be “the biggest catastrophe humankind has experienced,” perhaps suffocating or incinerating the 2m people who live on the shore, says Jarmo Gummerus, a Finnish engineer. He is working on the barge, built by ContourGlobal, an American energy company, which is seeking to extract the methane and convert it into electricity.
This KivuWatt project, costing $140m in its first phase, may be the most ambitious of many in Rwanda. Once up and running early this year, it is expected to increase the mountainous country’s power generation by a third. For Rwanda’s government, which still harks back to the genocide of 1994, when some 800,000 of its people were murdered in the course of three months, it is a symbol of revival, turning a potential disaster into an engine of growth and reinvigoration.
Yet such progress is being threatened by the chaos a short swim away in eastern Congo, where Western governments have put much of the blame for a spreading rebellion on Rwanda’s government and its dynamic, authoritarian leader, Paul Kagame. Several of them have withheld aid, on which much of the country’s development depends, accounting for more than 40% of Rwanda’s budget.
Landlocked, tiny in area, and more densely populated than any other country in sub-Saharan Africa, Rwanda has achieved what a leading British development expert, Paul Collier, calls the “hat-trick” of rapid growth, sharp poverty reduction and reduced inequality. Many donors have been deeply reluctant to stop or reduce aid, whatever the arguments over eastern Congo.
Britain, the second-largest bilateral contributor after the United States, has frozen, unfrozen and then refrozen its aid, worth £75m ($120m) a year. Other European governments have stopped or reduced their contributions. The Americans have suspended military aid, albeit worth a mere $200,000, and may cut development projects, depending on the views of Barack Obama’s new aid team. The World Bank, the IMF and the African Development Bank are shilly-shallying over the matter. “Rwanda’s relationship with the rest of the world has changed,” says a senior Western diplomat in Kigali, Rwanda’s capital.
As a result, Rwanda’s finance ministry expects GDP to grow by 6.3% this year rather than the 7.8% previously predicted. Inflation, which had crept up to nearly 7%, is expected to pick up. A shortage of foreign currency in Kigali has created a black market for the first time since 1994. Rwanda’s free health-care system, which is said to cover 90% of its citizens, is creaking. Bonuses to doctors and nurses that topped up their salaries by as much as 40% have already been cut. The dream of transforming a subsistence-farming economy into a middle-income services hub by 2020, based on annual growth of 11%, is fading.
Many of Rwanda’s leading lights, such as the Central Bank governor, Claver Gatete, say that the suspension of funds already promised is a gross betrayal. Rwanda’s model of development, elaborated closely with Britain, involving direct support for the budget, was widely hailed as an example for other poor countries to follow. Now that “aid is no longer a guarantee”, says Mr Gatete bitterly, the ability to make the best use of it has been lost. The Rwandan government, fretful over the aid suspension, is pondering how to use its recently acquired two-year seat on the UN Security Council as a lever for getting Western governments to relent.
It is not certain that a second phase of the KivuWatt project, which would have added another three barges and almost doubled the country’s output of electricity at an estimated cost of $250m, will now go ahead. “In future it’s going to be much harder to get a deal like this done,” says a senior Western aid man.