WB assures of Rwanda’s economic growth despite global uncertainty

An aerial view of Kigali Convention Centre and its environs in Kimihurura. The World Bank says Rwanda’s debt status remains in low risk distress zone. / Emmanuel Kwizera.

World Bank officials have said that all signs indicate that Rwanda in on course for continued economic growth in 2019, despite global uncertainties occasioned by trade wars.

The economy is projected to grow by 7.8 per cent in 2019 from 8.6 per cent last year.

Yasser El-Gammal, the World Bank Country Manager, said that Rwanda’s medium-term economic outlook is favourable as aspects such as inflation remain low while investments continue to grow.

The Bank, however, called for measures to strengthen private sector capacity to sustain the high growth trajectory in the long-run as opposed to reliance on public investments as is the case now.

“While public investments will continue to support the growth over the medium-term, Rwanda needs to strengthen its private sector to stay on a high growth trajectory in the long-run,” Aghassi Mkrtchyan a senior Economist at The World Bank said.

Rwanda’s performance is further buoyed by the fact that it’s one of only four countries in Sub-Saharan Africa with low debt distress status.

The Bank rates countries’ risk of distress, which is categorised as high, moderate, in-distress, or low.

Aghassi Mkrtchyan, a Senior Economist at the World Bank, said Rwanda maintains a low debt distress through careful borrowing, proper loan management and high economic growth.

He was speaking to The New Times on the sidelines of 14th World Bank Rwanda Economic Update in the capital Kigali. 

This comes at a time a majority of countries on the continent are said to be incurring more debt than they can handle partly due to terms of debt.

Rwanda’s debt level at present value is 32.9 per cent of GDP, and is below the critical EAC threshold of 50 per cent.

Other low debt distress countries in Sub-Saharan Africa include Senegal, Tanzania, and Senegal.

The Ministry of Finance said in March that the country is able to keep its debt level low largely because of prioritisation of strategic projects and quality of the financiers.

The Government prefers concessional loans as opposed to market value loans, it said.

A concessional loan is credit that is extended on terms that are substantially more generous than market loans and are usually from international development financiers such as the World Bank and African Development Bank.

The loans have low interest rates and long grace periods with the possibility of further review.

On the other hand, market value loans are not only expensive but have shorter payment durations.

The share of concessional loans in the total debt stock stood at 63 per cent as of end 2018.

Mkrtchyan said that Rwanda still has room to borrow more to finance development projects given that recent investments have shown a high return on investment.