Members of Parliament have cautioned against so-called "tied loans,” warning that restrictive financing conditions could undermine project implementation, drawing on past experiences with externally financed infrastructure projects.

They urged the caution on December 22 as the Chamber of Deputies approved a bill ratifying a financing agreement worth more than ¥344 million (over Rwf70 billion) between the government of Rwanda and the Export-Import Bank of China (China Exim Bank) for Giseke irrigation project in Gisagara District, Southern Province.

The loan agreement, which was signed in Kigali on August 21, 2025, clears the way for the implementation of an irrigation scheme aimed at boosting agricultural productivity and climate (drought) resilience, according to the Minister of Finance and Economic Planning, Yusuf Murangwa.

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Presenting the financing agreement, the Minister of Finance and Economic Planning, Yusuf Murangwa, told Parliament that the loan will be repaid over 13.5 years at an annual interest rate of 2 per cent, following a grace period of 6.5 years.

The project, he said, targets irrigation of 2,640 hectares and includes investments in water harvesting and efficient water-use technologies. It will involve the construction of key infrastructure, including an irrigation dam and water distribution channels.

According to Murangwa, the scheme is intended to help farmers transition from rain-fed agriculture to irrigated farming, allowing year-round cultivation, increased yields and more productive farming systems.

However, some MPs cautioned against repeating past mistakes linked to external financing.

MP Deogratias Bizimana Minani cited Rwanda’s experience with loans from India’s Exim Bank, which he said "stalled” the construction of the Base-Butaro-Kidaho road, warning that similar loan conditions could undermine the success of the Giseke project.

According to the Ministry of Infrastructure, the road loan from India Exim Bank came with unfavourable, tied-aid–like conditions that required 65–70 per cent of construction materials to be imported from India.

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MP Germaine Mukabalisa raised concerns about a provision of the agreement with China Exim Bank, which stipulates that goods, technology and services financed by the loan should be purchased preferentially from China.

Drawing on previous experiences, Mukabalisa said such conditions have delayed projects – hence driving up costs.

She expressed concern that, unlike other agreements that specify clear procurement thresholds such as requiring 70 per cent of inputs to come from the lender’s country, the current agreement is broad and could result in most procurement being sourced from China.

"These are funds that the government will repay, yet some of these technologies are available locally, within the region or from other markets at lower cost,” she said, questioning what safeguards exist if the lender insists on sourcing from more expensive suppliers.

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Finance minister allays MP’s concerns

Responding to the concerns, Murangwa said Rwanda has had a positive track record working with China Exim Bank, adding that several jointly financed projects have been implemented successfully.

He acknowledged that preferential procurement clauses are common in Exim Bank financing, particularly when loans are offered on favourable terms such as long grace periods and low interest rates.

In this case, he said, the project is expected to be completed within about two years, meaning the country would benefit from the investment for several years before repayment begins.

To address concerns over costs, Murangwa highlighted two safeguards in the agreement. First, unlike some Exim Bank loans, the China Exim Bank facility does not impose a fixed quota requiring a certain percentage of inputs to be sourced from China.

Second, even where procurement is done in China, there will be competitive bidding rather than single sourcing.

"We are confident that we will not overpay,” Murangwa said.