Gov’t to issue first ever Diaspora bond

The central bank will issue a diaspora bond next year on behalf of government to raise money to finance infrastructure development and increase the treasury’s ability to tap into resources from diaspora Rwandans. “We want to maximise the resources from the diaspora by giving them additional alternative to traditional remittance transfers,” central bank Governor, Amb. Claver Gatete, told Business Times last week.
Funds that will be raised from government bonds will be used to implement the country’s infrastructure projects. The New Times / File photo
Funds that will be raised from government bonds will be used to implement the country’s infrastructure projects. The New Times / File photo

The central bank will issue a diaspora bond next year on behalf of government to raise money to finance infrastructure development and increase the treasury’s ability to tap into resources from diaspora Rwandans.

“We want to maximise the resources from the diaspora by giving them additional alternative to traditional remittance transfers,” central bank Governor, Amb. Claver Gatete, told Business Times last week.

He said the move, where government will borrow money from diaspora Rwandans, is still in its early stages with the central bank carrying out research on different models across other countries.

Since Rwanda has no experience in diaspora bonds, it intends to borrow a leaf from countries like Kenya, Ethiopia and Bangladesh in an attempt to identify and replicate the structure that would suit the country.

The central bank is also planning an awareness campaign aimed at marketing the bond.

The modalities of the diaspora bond such as the coupon rate and its size in terms of money to be raised are yet to be worked out. However, its tenure is likely to be ten years.

Rwandans in diaspora currently participate in the Rwanda Stock Exchange by buying treasury bonds and shares in listed companies. There is no product that is specifically designed for them at the moment.

In a similar move aimed at raising resources from Rwandans and mobilise long term investment capital, government will issue a seven year treasury bond by February 2012.

Last month, government successfully listed a ninth Rwf2.5b Treasury bond, which increased its debt held in bonds to Rwf16b from Rwf11b in 2010.

Finance Minister, John Rwangombwa, says that the treasury still has the room to borrow with capacity to pay as long as the country’s net present value of debt to exports remains below 150 per cent.

“Rwanda’s debt to Gross Domestic Product (GDP) ratio is at 20 per cent, which is a comfortable position to be in,” he said.

 Rwanda’s total debt, according to the Minister, stands at Rwf76b of which Rwf535billion foreign debt with a domestic debt of Rwf209b.

The threshold of net present value of debt to exports above which a country is considered to be heading towards the red zone is 150 per cent. The net present value of debt to exports is usually used to determine the country’s debt sustainability. 

“Last year our NPV to export ratio stood at 92 per cent and our projections for 2015 will still be around 100 per cent which is a comfortable position,” Rwangobwa said.

Government is also considering issuing bonds in the international capital market to raise money to finance its infrastructural projects.

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