Paul Kagame is angrier than I've ever seen him. Rwanda's president is famously direct with his critics. His contempt for governments he's crossed swords with, led by the French, is only marginally less vitriolic than his view of human-rights groups daring to lecture him, the rebel leader whose army put a stop to the 1994 genocide of 800,0000 Tutsis. But now even friends are regarded with suspicion to the point of hostility. Take London and Washington accusing Rwanda of perpetuating the interminable and bloody conflict across the border in Congo and flagging up concerns that Kagame is constructing a de-facto one-party state.

They are hypocrites, blind to their own histories, says Rwanda's president. "Who are these gods who police others for their rights?" he says in an interview with the Observer at the presidential office in Kigali. "One of the things I live for is to challenge that. I grew up in a refugee camp. Thirty years. This so-called human-rights world didn't ask me what was happening for me to be there 30 years."

Nearly two decades after the leader of the Rwandan Patriotic Front (RPF) emerged from the hills to overthrow the extremist Hutu regime trying to exterminate the Tutsi population, Kagame is still a combative and divisive figure. To some he is the Lincoln of Africa for rising above his country's old divisions – and his own suffering after narrowly escaping as a child across the border to Uganda during an earlier bout of Tutsi killing – to preach forgiveness, reconciliation and hard work as he forges a new Rwanda out of the ashes of genocide.

The warrior: Paul Kagame with RPF troops in 1993, during the civil war that preceded the genocide. Photograph: Joel Stettenheim/Corbis

To others, Kagame has exploited his country's tragic history, and the west's guilt over its inaction during the slaughter, to construct a new Tutsi-dominated authoritarian regime using the legacy of genocide to suppress opposition and cover up for the crimes of his own side. In doing so, critics warn, he is laying the groundwork for another bout of bloodletting down the road.

For years, the heroic view of Kagame prevailed, not least in Britain and the US which, between them, provided about half the money to fund the Rwandan government's budget. But, in recent months, there's been a very public shift. Once-unquestioning support from Washington, where Bill Clinton called Kagame "one of the greatest leaders of our time", has given way to cuts in military aid and warnings from the US war crimes chief that Rwanda's leadership could find itself under investigation from the international criminal court over its backing for rebels in eastern Congo.

Britain, too, has stepped back from support so unequivocal that Clare Short, then Labour's international development secretary, called Kagame "a sweetie" and Tony Blair established a foundation to help the man he calls a "visionary leader" to govern. Britain's Conservative party has been no less enthusiastic. It set up a social-action project in Rwanda to bring hundreds of volunteers over recent years, including Tory MPs, to assist with construction of schools and community centres. Now the relationship is cooler as Congo's own tragedy, and Rwanda's part in it, can no longer be ignored.

A trail of imprisoned opponents, exiled former allies and assassinations pinned on Kagame by critics has also eaten away at his claims to be an enlightened, modernising leader who embraces new technology and is an enthusiastic blogger and tweeter. Among those locked up was Kagame's predecessor as president, Pasteur Bizimungu, while former allies from the RPF's days as a rebel army have fled abroad. They include Kagame's former chief aide, Theogene Rudasingwa, who formed a new political party with other exiles including former army chief of staff, General Faustin Kayumba Nyamwasa, who was wounded in an apparent assassination attempt in South Africa.

Another former ally, ex-interior minister Seth Sendashonga, who posed a serious political challenge after breaking with Kagame, was assassinated in Kenya 15 years ago. Rwanda's president has repeatedly denied any hand in the murder and several other apparently politically motivated killings since. But as a pattern of jailings, disappearances and deaths has developed there's no shortage of people ready to believe the worst.

Kagame increasingly takes a "with us or against us" view of even sympathetic criticism. The sharpness of his reaction suggests he was caught unawares by those he regarded as loyal friends deciding to keep a distance. He denies this. "Nothing would catch me off guard because I understand the world I live in. I understand it very well. And the world I live in is not necessarily a fair or just world. I have dealt with these injustices for the bigger part of my life," he says.

Part of what infuriates Kagame is what he sees as the age-old duplicity of neo-colonial powers. On the one hand politicians in western capitals are critical over democratic shortcomings in Rwanda. On the other, their diplomatic missions in Kigali praise Kagame for his single-minded, some say authoritarian, leadership in reconstructing his country and are wary of the day he leaves power.

Certainly, Rwanda is a better place than could have been imagined in the aftermath of the genocide. When Kagame's RPF rebels overthrew the Hutu extremist regime and seized power in 1994 they inherited a country dotted with mass graves and stripped of people. A sizeable proportion of the Hutu population fled across the borders to Zaire and Tanzania driven by fear, and a defeated Hutu leadership determined that Kagame should take over a "country without a people".

The Hutu army and its allied extremist militia, the interahamwe, were watered and fed in United Nations refugee camps even as they kept up the ethnic killings through cross-border raids. Kagame had few resources to draw on internally with many traditional institutions, such as the Catholic church, compromised by their part in the killings, including the involvement of priests and nuns in murder. Kagame's challenge was to reconstruct a country in which Tutsis could live without fear and the Hutu majority would accept him as its legitimate president.

A decade ago, one RPF regional military governor, Deo Nkusi, put it to me this way: "Changing people here is like bending steel. The people were bent into one shape over 40 years and they have to be bent back. If we do it too fast we will just break them. We have to exert pressure gradually."

Kagame was austere and demanding. He lambasted Rwandans as lazy and urged discipline. That appeared to reflect a view that the moral degeneracy underpinning the genocide was in part a product of a population insufficiently dedicated to hard work. The president urged Rwandans to confront the past and then put it behind them. Faced with 150,000 alleged killers packed into jails, his government spurned colonial-era courts in favour of a traditional form of justice that provided a forum for confessions and pleas for forgiveness by the killers, and laid the ground for a degree of reconciliation.

But Kagame takes nothing for granted. He says the path to a new Rwanda is through economic and social development that produces politics without hate. "The political, the economic, the social are tied together like the strands of a rope. The social and economic, if they are firm, tend to strengthen the other. In a state of poverty, illiteracy, people just remain exposed to all kinds of manipulation. That's what we have lived. It's easier to tell a poor person: you know what, you are poor, you're hungry because the other one has taken away your rights."

More than a million Rwandans have been lifted out of poverty since 2006. Access to healthcare and education is expanding. A construction boom has transformed the Kigali skyline. Kagame is also counting on time to solidify the gains. Two-thirds of Rwandans are under the age of 25 and open to a new way of thinking shaped by schools and learning the lessons of the past. But Kagame says he recognises that ridding Rwanda of the virus of hate and anger is not so simple.

"The reality of it is that things don't just disappear," he says. He points to the children that grew up without families. "It means they think about what created this situation where they have no families. So it's not just that they're growing up in a new situation and they have no bearing to the tragic past. Depending on how the situation continues to be managed, then the healing process – or the process of overcoming our past – becomes easier or more difficult." It is this achievement that has won Kagame previously unflinching support in many western capitals, even if it may be another generation before Rwandans can feel confident that, like Germany, they really have purged their past from their social fabric.

So it is all the more baffling and frustrating to Paul Kagame that he finds himself being called to account for a situation he says is not of Rwanda's making and is really the responsibility of the very people pointing the finger at him.

Rwanda's involvement in Congo has been undeniable since its 1996 invasion to clear the UN refugee camps used by Hutu extremists. The invasion evolved into a perpetual de-facto occupation in alliance with Congolese groups and the plunder of the region's considerable mineral resources by Rwanda, Burundi and Uganda. Security was an issue, but there was also money to be made.

Understanding for Rwanda's position eroded as eastern Congo fell under the control of warlords, and the people endured mass rape, massacres and starvation. Then, last year, a report by UN-appointed experts gave what it said was detailed evidence of the Rwandan military arming a mostly Tutsi rebel group in eastern Congo, M23, then led by a wanted war criminal, Bosco Ntaganda (who has since surrendered to the ICC).

Rwanda worked hard to discredit the report, but it triggered surprising reaction from those who had previously covered for Kagame. Washington said it found the UN research credible. The British also felt they could no longer turn a blind eye.

Facing the future: the changing skyline of the capital city, Kigali, now experiencing a period of economic growth. Photograph: Andy Hall for the Observer

Kagame outright denies continuing Rwandan involvement in Congo and spends close to half an hour in a detailed explanation of why sending Rwandan troops there was a good thing, how the UN report was the stitching together of rumour, speculation and lies, and why it is decades of Belgian, French and American involvement in that blighted country that is the real cause of its problems. "I'm telling people look at themselves in the mirror. They are the ones responsible for problems in Congo, not me," he says.

"All the responsibilities that lie with the rest of the world, historically and in the present, have come to this: it is Rwanda responsible for all the problems. The Congolese themselves? No, not responsible for anything. Even the wasting of resources between Congo and the international community is something that has to be masked and packaged until Rwanda is made the problem.

"You have a [UN peacekeeping] mission in Congo spending $1.5bn every year for the past 12 years. Nobody ever asks: what do we get out of this? From the best arithmetic, I would say: why don't you give half of this to the Congolese to build schools, to build roads, to give them water and pay these soldiers who rape people every day? I'd even pay them not to rape."

Kagame goes on the attack over claims by the US and UK at diplomatic meetings to have additional evidence of Rwandan assistance to M23. "Up to this moment they've never given anybody a bit of what they're talking about – evidence," he says. The US froze military aid. Britain suspended some financial support and then put in place new controls. Kagame regards Rwanda as the victim of a diplomatic lynch mob and accuses the British government of laying the groundwork by sending the BBC and Channel 4 News to file reports critical of Rwanda. "It's just a circus. You start wondering about the people you're dealing with," he says.

The situation came to a head at a meeting between Kagame and ambassadors from the major foreign donors, including the UK and the US. I tell him I heard that diplomats had rarely seen him so furious. "Yes. Probably I was not angry enough. You can't have these people…" He trails off. "When you tell them the truth they think you are angry."

Part of what he says disturbs him is foreign governments cutting aid to the projects they have declared a success. What, he wonders, does that have to do with Congo? "How does affecting aid help deal with those things they are complaining about? It's simple logic. It doesn't make sense," he says.

But then he decides it does make sense because the aid freeze was not about Congo at all. "One thing that will never be said openly, but is a fact, aid is also a tool of control. It's not completely altruistic," he says. "If a country's giving us aid it doesn't give them the right to control us. I mean it. I can say thank you, you are really helpful. But you don't own me."

Kagame's anger rises again at what he says is western donors' insistence on talking about an issue he regards as having nothing to do with aid. "They say: these Rwandans think they are free, but actually they are not free. Sometimes it becomes a laughable matter, honestly." As with almost everything else in Rwanda, issues of freedom are bound up with the legacy of genocide. Kagame's critics say he is using laws intended to prevent the propagation of the kind of hate speech that contributed to the killings to suppress criticism of, and opposition to, the government. For some, the cause célèbre concerns Victoire Ingabire, leader of the Unified Democratic Forces, a coalition mostly of exiles, who attempted to challenge Kagame in the 2010 presidential election. She was arrested before the vote and subsequently sentenced to eight years in prison for inciting revolt, genocide ideology and forming an armed group.

Her supporters dismiss the charges as trumped up and hail her as a Rwandan version of Aung San Suu Kyi, the Burmese opposition leader. Foreign human rights groups have raised concerns about freedom of speech and the conduct of the trial after the principal witnesses against Ingabire were held incommunicado and possibly tortured into providing testimony.

But Ingabire's case also reflects the complexities of talking about the past in a country living with the legacy of genocide. On returning from 15 years' living in the Netherlands, Ingabire gave a speech at Kigali's genocide memorial, where thousands of victims are buried, equating the deaths of Hutus in the civil war with the murder of 800,000 Tutsis during the extermination campaign: "If we look at this memorial, it only refers to the people who died during the genocide against the Tutsis. There is another untold story with regard to the crimes against humanity committed against the Hutus. The Hutus who lost their loved ones are also suffering; they think about the loved ones who perished and are wondering, 'When will our dead ones also be remembered?'"

Tutsi survivors were outraged not only by the implication in her statements of a "double genocide", which they saw as intended to diminish the organised killings, but the choice of location at which to make the comments.

Ingabire's history casts doubt on her claim to have merely raised a legitimate issue for discussion. She is president of the Republican Rally for Democracy in Rwanda, a group born in the Hutu refugee camps in the mid-1990s with the backing of the politicians and army officers who carried out the genocide and who have spent the years since attempting to rewrite history.

Kagame points to the bans on Holocaust denial in France and Germany as evidence that foreign criticism over Ingabire's case is western hypocrisy. "The same people who have those laws (banning Holocaust denial) are saying we shouldn't have them. We're not blind to this," he says.

However, Ingabire's case does point up the limits on discussing what many Rwandans think are legitimate issues. Gonzaga Muganwa, a journalist and presenter of a radio phone-in, watched Ingabire's speech at the memorial. "We were so shocked. Nobody has heard such words spoken on Rwandan soil since the genocide," he says. "I myself wrote a piece saying Ingabire should be prosecuted. It's like saying Churchill bombing Dresden was the same as the Holocaust. The Tutsi genocide was an attempt to exterminate them." But Muganwa does have problems with restrictions on freedom of speech. He shakes his head over the case of two journalists jailed for genocide denial, divisionism and insulting Kagame. Rwanda's supreme court overturned the genocide-related convictions, but upheld those for defaming the president and public disorder. "Defaming the president should not be a criminal offence," says Muganwa.

He also confirms what other Rwandan journalists say: that they self-censor. Muganwa decided to look at the facts behind an issue widely if quietly discussed – a belief that a younger generation of Rwandans appointed to senior administrative positions in the government are mostly Tutsis who grew up in exile in neighbouring English-speaking Uganda, the same as many in the RPF leadership. It's a sensitive issue not only because it feeds into old Hutu extremist accusations of "Tutsi domination" but because of unhappiness at Tutsi exiles prospering while the genocide survivors still struggle in poverty.

"When I did my research I found that most of those people tended to speak English and some had family connections," says Muganwa. "I stopped because I know I would have been accused of creating divisions. I would have been open to prosecution. It's a no-go area. People discuss it in bars all the time, but you can't print it."

Muganwa goes on to raise the case of Frank Habineza and his Democratic Green Party of Rwanda. "I ask myself why the government refuses to register the Green party," he says.

As a former member of the RPF who broke with Kagame, no one could accuse Habineza of promoting genocide ideology. In 2010 he attempted to register the Greens for the presidential election, but fled the country after his party's vice president was found with his head cut off. Now he's back fighting what he believes is a deliberate government strategy to prevent him organising.

"It has not been easy. This government is lacking in recognition of political rights," he says. "You will not find anything divisive in what we've done, what we've said. The only thing we want is democracy, that people are consulted. We have a tendency here where the authorities just make a decision and hand it down to the people. Kagame is more interested in maintaining power and he will do anything to stay in power no matter what type of problems he leaves us with."

Kagame's response is to suggest that the concerns are all foreign inspired. "We really need to decide for ourselves, not what people on the outside decide for us," he says. "In terms of our internal political context, we manage it as our affairs. And the outsiders keep bringing in all kinds of poisons; we deal with that as well. But we have to deal with our lives as we deal with them, and keep managing those that come from outside as best we can to deal with it. And even tell them what they don't like to hear – that they bring prejudice and double standards in our own situation."

this raises the question of 2017. Rwanda's constitution requires Kagame to step down in four years, but already there are rumblings about changing it to allow him to stay on as president. Some of this is generated by the sycophancy expected of underlings wishing to remain in their leader's good graces, but there are other, unusual, forces at work as well.

A fair number of genocide survivors fear the day Kagame relinquishes power, believing his strong hand is all that keeps another bout of ethnic bloodletting at bay. There are also Hutus wary of political change because they see Rwanda's president as keeping a lid on violent Tutsi retaliation for the genocide. Others, including Kagame's own justice minister, believe it is essential for Kagame to step down in 2017 in order to maintain the primacy of the rule of law.

Kagame has been equivocal in the past, but greets the news of his justice minister's views with belligerence. "Why don't you tell him to step down himself? All those years he's been there, he's not the only one who can be the justice minister," he says. "In the end we should come to a view that serves us all. But in the first place I wonder why it becomes the subject of heated debate."

One of the reasons is that Rwandans are not alone in wondering if the final decision will really be the product of political consensus or, like so much else, ultimately decided by Kagame himself. Foreign governments have one eye on what they now regard as the salutary experience of dealing with Yoweri Museveni, president of neighbouring Uganda.

Two decades ago Museveni was hailed as one of a "new breed" of African leaders who broke with the plundering "presidents for life" and promised an era of good governance and freedoms. Museveni delivered to some extent, but there's no more talk of the new breed as Uganda's president heads toward his 30th year in power with little sign of political opponents being allowed to challenge him. When I tell Kagame there is a suspicion in some foreign capitals that he is treading in the footsteps of Museveni – a man regarded by some in the west as having betrayed his commitment to democracy – Rwanda's president returns to his favoured theme.

"Who are they, first of all, to feel betrayed? They are not gods. They don't create people. They don't own people. This whole thing of saying betrayed – betrayed by what?" he says.

Kagame wonders whether anybody ever accuses the Liberal Democratic party of Japan, which has ruled almost continuously since 1955, of clinging on to power. "I'm sure if the RPF went on for 40 years it would be a crime, but for the Liberal party in Japan it's not a crime. This is what disturbs me. Sometimes you feel like doing things just to challenge that – that somebody is entitled to do something, but says when you do it you are wrong. I find it bizarre," he says. "If it happens elsewhere and people think it's OK, why do people say it's not OK when it happens in Rwanda? I just don't accept this sort of thing. We have many struggles to keep fighting. Some of the things are like racism: 'These are Africans, we must herd them like cows.' No! Just refuse it."