Finance Minister Ndagijimana on Eurobond issue, Rwanda’s path to economic recovery

The Government of Rwanda has achieved a significant milestone by successfully raising $620 million through the issuance of a 10-year Eurobond. The proceeds from this bond, which was oversubscribed, are earmarked to repay the existing Eurobond and provide support for the country's economic recovery efforts in the wake of the COVID-19 pandemic. The issuance was made at a favorable rate of 5.5%, marking a strategic move by Rwanda to switch from short-term debt to long-term paper, thereby extending its yield curve. Finance Minister Uzziel Ndagijimana discussed the rationale behind this decision during a recent interview on CNBC Africa. Minister Ndagijimana emphasized that the current market conditions presented an opportune moment to refinance the existing Eurobond, which had been issued in 2014 at a higher interest rate of 6.625%. By retiring the old bond and issuing a new one worth $620 million, Rwanda aimed to mitigate the debt repayment risk looming in 2023, when the previous bond was set to mature. The majority of the proceeds would go towards repaying a significant portion of the old debt, while the remainder would be channeled into supporting Rwanda's economic recovery plan, particularly focusing on high-growth projects in agriculture and agro-processing. Furthermore, Minister Ndagijimana clarified that the funds raised through the Eurobond issuance would not be utilized for settling local debt in the local currency. Instead, the government plans to finance new projects that are geared towards fostering economic growth in the medium term. The Minister highlighted the importance of prioritizing projects that would contribute to enhancing exports and driving economic development. In the interview, Minister Ndagijimana addressed the question of Rwanda's potential return to the bond market in the future. He underscored the government's commitment to prudent debt management practices and stated that any future forays into the financial market would be contingent on specific project financing needs and prevailing market conditions. The Minister reiterated that Rwanda's approach to borrowing would be guided by a comprehensive debt management strategy aimed at maintaining debt sustainability. One of the key areas of focus for the funds raised through the Eurobond issuance is the rebuilding of Rwanda's economy following the adverse impact of the COVID-19 pandemic. Minister Ndagijimana outlined the government's recovery plan, which includes measures to bolster sectors such as agriculture and establish a recovery fund to support businesses adversely affected by the pandemic. The Minister expressed confidence in Rwanda's economic trajectory, projecting a GDP growth rate of 5.1% for the year and aiming to achieve pre-pandemic growth levels by 2023. However, the Minister also acknowledged the inherent risks posed by the ongoing global health crisis and emphasized the importance of vigilance in monitoring and containing the spread of COVID-19. He cited external factors as significant determinants of Rwanda's growth outlook and highlighted the need for both domestic and international efforts to combat the pandemic effectively. Regarding concerns raised by rating agencies about Rwanda's increased public spending and debt levels, Minister Ndagijimana assured that the government had a fiscal path and a medium-term strategy for debt management. While acknowledging the temporary spike in fiscal deficit and debt-to-GDP ratio due to heightened spending during the pandemic, the Minister affirmed that Rwanda had a plan to reverse this trend post-2023, with a focus on fiscal consolidation and debt reduction. The interview concluded with a discussion on Rwanda's openness to foreign direct investment (FDI) and its favorable business environment. Minister Ndagijimana highlighted Rwanda's proactive measures to support investors and maintain a conducive business climate, noting recent signs of progress in FDI inflows. The Minister affirmed Rwanda's commitment to economic resilience and expressed confidence in the country's ability to attract foreign investments, citing the successful Eurobond issuance as a testament to investor confidence in Rwanda's economic prospects.