The International Monetary Fund (IMF) has expressed confidence in Rwanda’s capacity to meet its debt obligations. Haimanot Teferra, Chief of IMF Mission to Rwanda, said according to their debt analysis indicators, Rwanda’s risk of debt distress remains moderate. “Even in this volatile environment where you have a loan maturity, repaying the debt will not become an issue. So, the fact that there is not a lot of reliance on the market helps mitigate that.” Most of Rwanda’s external debts are dollar-dominated and while one would calculate the increased amount in the current trend of currency depreciation against the dollar, Teferra noted that the government will stay afloat because of its highly secured concessional resources. A concessional loan is credit that is extended on terms substantially more generous than market loans usually by international development financiers, such as the World Bank, African Development Bank, and IMF. The loans have significantly low-interest rates and long grace periods with the possibility of revising terms further. According to officials, more than 80 percent of Rwanda’s debt is concessional. John Rwangombwa, the Governor of National Bank of Rwanda, explained that normally, a country shouldn’t exceed a 23 percent ratio of debt servicing to domestic tax revenue collected annually. According to IMF’s debt servicing indicators, a number beyond 23 percent means that a country is encountering debt distress – where it is unable to fulfil its financial obligations and debt restructuring is required. “By the end of 2022, Rwanda will be at 14.5 percent and next year it will increase to 30 percent because of the remaining money owed under the Eurobond issued in 2013, and when this will be fully covered, the ratio will bounce back to 12.2 percent in 2024,” he said. In 2013, Rwanda issued a $400million Eurobond on the Irish Stock Exchange with an interest rate of 6.625 percent for 10 years. According to the African Development Bank’s economic outlook of Rwanda, debt-to-GDP ratio in 2021 stood at 74.6 percent up from 71.2 percent in 2020. The mobilised resources are used in different priority development projects of the country. Uzziel Ndagijimana, Minister of Finance and Economic Planning, said that although there is continued pressures from the Covid-19 pandemic and the Russia-Ukraine war which in some cases push for extra borrowing, “it is done in a careful manner that does not surpass the country’s ability to pay back.” In the recent past, some countries negotiated with their debtors on matters of debt relief or waivers but Rwanda did not take that path because it is not facing debt distress, according to Ndagijimana. On October 7, IMF approved a $310 million (approximately Rwf318 billion) loan to Rwanda to support climate-related considerations in the design of macroeconomic policies and frameworks, enhance climate-related risk management for financial institutions, among others.
