The government yesterday kicked off a campaign to market its Rwf12.5 billion ($18.3 million) Treasury Bond to raise funds for infrastructure programmes and reinvigorate the bond market.
The bond is set to be listed on the Rwanda Stock Exchange (RSE) on Monday 24, and targets local and regional investors. It has a maturity period of three years.
The interest rate will be determined on Monday at the close of “book building” – a process through which potential investors will determine its demand and price through public bidding.
Finance minister Claver Gatete said a countrywide awareness campaign will be conducted this week. The campaign will also spread to Kenya with the aim of attracting interest from potential institutional and individual investors.
“This is where you put your money and get good returns with proper guarantee from government. We are putting in place incentives to attract investments, such as reducing the withholding tax on interest to 5 per cent, down from 15 per cent for EAC residents,” Gatete said.
“It will be rolled out countrywide to ensure that even the ordinary citizens, who may not understand the dynamics of the bond market, benefit,” he said.
Once the bond is listed on Monday, bids from investors will be received until February 27 at a minimum of Rwf100,000 for individuals, while companies will enlist for competitive bids of up to Rwf50 million.
“Interested investors should consider this as a risk-free business venture with returns guaranteed by the government. You can sell the bonds anytime on the RSE and you can also pledge them as collateral for any loan to a third party,” Celestin Rwabukumba, the chief executive officer of RSE said.
Both primary and secondary bond markets have been inactive on the RSE, but a recent survey by BNR revealed that appetite for government paper on the local market increased following the success of Rwanda’s $400 million international Eurobond issued last year.
Proceeds from the Eurobond have been invested in clearing RwandAir’s debts, production of 28mw of electricity from Nyabarongo hydro electricity project and construction of Kigali Conventional Centre.
The completion of a five-star hotel at the dome-shaped centre, as well as the 28mw from Nyabarongo will both be achieved by May, according to Gatete.
Between 2008 and 2011, the BNR issued long term Treasury Bonds, worth Rwf31 billion, in order to promote the capital market by availing investment opportunities.
The subscription level reached a staggering 197 per cent on average and the price ranged between eight per cent and 11.5 per cent. Government has paid back most of it, with Rwf8.5 remaining to be settled.
Fitch Ratings, one of the most respected rating agencies in the world, this month rated Rwanda’s long-term foreign and local currency Issuer Default Rating at ‘B’, underlining the country’s credit worthiness and debt repayment ability.
According to Gatete, government debt, which stands at 29 per cent of GDP, is still sustainable and offers room for flexibility in sourcing for funds.