Rwanda’s Debt is Carefully Managed-IMF

The international Monetary Fund (IMF) has noted Rwanda’s prudent management of its debt while it continues to register notable progress in sustaining high and inclusive growth.

Speaking at the conclusion of a two week IMF staff mission to Rwanda, Laure Redifer, the IMF mission chief pointed out that Rwanda’s debt levels have been carefully managed despite capital intensive projects the country has undertook.

Careful management of Rwanda’s debt is mainly attributed to the fact that the government has made to choice to keep a low risk of debt distress status as an anchor to its fiscal policy. This has been achieved through a process of careful prioritization and selection of projects.

Preliminary results of the debt sustainability analysis show that the risk of Rwanda’s debt remains low with a present value of debt to GDP reaching 32.9% against a threshold of 50%. The share of concessional loans in the total debt stock stood at 63% as of end 2018 compared to a level of 57.4% as of end 2017. Thanks to the country’s debt strategy to maximize concessional borrowing in favor of commercial borrowing.

“Most of the country debt is concessional and was taken out to finance huge investment projects that are expected to bring returns so we are not worried about the debt levels. On the other hand, the ongoing implementation of the National Strategy for Transformation has resulted in strong investment inflows and increased exports diversification,” Ms Redifer said.

The Minister of Finance and Economic Planning Dr. Uzziel Ndagijimana reiterated IMF position noting that Government has put emphasis on maintaining sustainable debt levels. “Most of our debts are from multilateral organizations and are highly concessional allowing us to have lower debt distress levels,” Minister Ndagijimana said.

Rwanda’s economy grew by 8.6% in 2018 driven by robust activities in all sectors of the economy. At the same time inflation remained well below Central Bank’s targeted inflation range of 2-8% reflecting ample food supplies and low inflationary pressures.

Growth is projected at 7.8% in 2019, and over the medium term at around 8%. Large investments such as Bugesera airport, Hakan peat plant and electricity infrastructure are expected to bolster growth. Over the long term, extensive private and government investments in manufacturing, tourism, agriculture ICT, health and education among others, are expected to transform Rwanda’s Economy to high- value added activities, and boost per capita incomes and living standards.

For the past two weeks IMF held discussions with senior Government officials on a new three- year Policy Coordination Instrument (PCI). The overall objective of the program will be to support the implementation of NST1, while maintaining macroeconomic stability. PCI will consist of four main pillars which include:

• A medium term fiscal path that allows more spending to achieve NST1 goals while maintaining public debt at sustainable level;

• Mobilizing domestic resources to support development goals including broadening the tax base and strengthening tax compliance

• Enhancing Fiscal transparency

• Supporting the implementation of National Bank’s forward looking monetary policy operational framework including development of financial markets and broader access within the economy to financial resources.

“We have concluded negotiations on the new PCI that will allow IMF to support our seven-year Government Program by ensuring that we maintain sustainable economic growth in the medium to long term, Minister Ndagijimana noted.

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