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Rwanda bets on LSE bond to boost economic growth

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Rwanda is eyeing an economic boost from its inaugural $40 million (Rwf37 billion) bond, which was issued in London at the UK-Africa Investment Summit 2020.

The Rwandan franc-denominated paper was issued by the World Bank to finance government projects in the 2019-2020 financial year budget. The bond offers investors an annual coupon of 9.25 per cent. It matures on January 20, 2023.

“The World Bank has a big portfolio of investors, which the country will be banking on,” said Celestin Rwabukumba, the chief executive officer of Rwanda Stock Exchange, noting that the country’s nascent capital markets will benefit from the listing.

The bond, which is the seventh in sub-Saharan African that the World Bank has issued, is expected to boost confidence and help attract foreign private investment, which the country needs to achieve sustainable economic growth in the long term.

“Capacity building in local capital markets is a critical component of international development finance. This transaction highlights the potential to grow further demand from international investors in these markets,” said Will Weaver, Head of EMEA Debt Capital Markets & Syndicate.

In the short term, it is expected to improve liquidity as the government, the biggest paymaster in the economy, increases spending to accelerate growth.


According to the latest update by the International Monetary Fund released on January 17, 2010, domestic liquidity pressures were met through increased activity on the interbank market and use of the central bank (National Bank of Rwanda)’s reverse repo facility.

“In the long run, Rwanda is positioned as a good destination for investment and the issuance in Rwf minimises the depreciation risk,” said Maurice Toroitich, chief executive officer of Bank Populaire du Rwanda Ltd.

Mr Toroitich said rising geopolitical tensions, notably among East African countries and between the United States and Iran, and its main trading partner China, cast a shadow of uncertainty that is bad for business.

Details of the specific investments that will benefit from the bond proceeds in the budget are yet to be made public.

The government plans to increase spending by 11 per cent in the 2019/2020 financial year to Rwf2.8 trillion ($3.2 billion) from Rwf2.585.2 billion ($2.9 billion).

Donors will fund 14 per cent of the budget while the rest will come from revenue and debt, Finance minister Uzziel Ndagijimana told parliament in June last year.

Some of the priority areas in 2019/2020 include job creation, improving transportation, water and sanitation infrastructure as well as service sector in urban and rural areas.

According to the IMF, Rwanda’s macroeconomic performance remains strong as growth continues to beat expectations, averaging 10.3 per cent in the first half of 2019, on the back of a booming construction sector, robust activity in services sector, and a healthy agricultural output.

“The 2019 growth projection has been revised up from 7.8 to 8.5 per cent, with strong upside risk—especially given the recently released GDP figures suggesting that the economy grew in double digits in Q3 2019,” the IMF said in a statement released on January 17, 2020.

However, the fiscal deficit in 2018/2019 was higher than expected due to accelerated implementation of investment spending. This, combined with stronger demand for capital-goods imports needed for construction, has led to a widening of the current account deficit.

Growth should remain strong, at around 8 per cent, over the next two-three years, the IMF said.

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