This part's explainable. San Cloe had gone through a failed coup and is now an apartheid state, segregated between humans and non-humans, the latter either deported or quarantined into districts where much of the coup supporters have hidden in. In this transition, a large portion of the armed forces was reduced by the removal of all non-human personnel, plus the remaining army was cut in half to create the Republican Guard. Throughout this whole course of several decades, much of their defense spending is lost, and most of the world have imposed major arms embargoes & sanctions against them. So think of it like 1960s/70s South Africa.

So, for this weapon, it may not be effective against a modern enemy, but since insurgents have only what they can steal or build themselves, like improvised armored vehicles, the large recoilless rifle is a good alternative to an ATGM (any that have been designed or bought prior to the embargoes are reserved for the Army, not the Republican Guard), and with it's small size compared to a main battle tank, it's better-suit for tight urban areas.