Despite the global shocks, Rwanda has successfully repaid $400 million in European bonds, reducing default risk and demonstrating financial resilience. IMF support and proactive measures by the Rwandan government are contributing to the success of the debt repayment, supported by $63 million from the allocation of special drawing rights.
Lower interest rates and strategic debt management strategies enable Rwanda to reduce its debt burden and manage interest payments, thus contributing to successful debt repayment. Despite the pressure on Rwanda’s finances due to continued global shocks related to the prolonged impact of the Covid-19 pandemic, the war in Ukraine and the appreciation of the US dollar,
Rwanda has successfully repaid a 400 million USD worth of European bonds. The full payment, which is expected to arrive this week, has been successfully made, according to information obtained by The EastAfrican, a media outlet focused on East African news.
According to officials from Rwanda’s Ministry of Finance and Economic Planning, the International Monetary Fund (IMF) was able to provide the financing, which saved the government money. “The government has set aside $63 million under the International Monetary Fund’s Special Drawing Rights (SDR) allocation it received in 2021 to address the impact of Covid-19 on the economy,
” The Treasury Department told The EastAfrican. “This proactive and foresight measure by the government has significantly reduced the risk of default and enabled the successful repayment of the remaining 15.1% of the 2013 European Bonds,” the ministry added. . However, Rwanda was able to reduce its debt during the pandemic using a second $620 million in European bonds, issued in response to the low interest rate environment, to repay some of the debt. 400 million dollars.
The yield on the 10-year European bond worth $620 million issued in April 2021 was 5.5%, lower than the 2013 yield of 6.625%. Over the next ten years, falling yields resulted in his annual interest payments being reduced, which enabled him to manage his debt.
With public debt and guaranteed public debt significantly increasing to 78.3% of GDP in 2021 from a pre-pandemic rate of 60.7% of GDP in 2019, the government has borrowed heavily in recent years to support support economic recovery and development initiatives.
However, with long maturities and low interest rates, development finance institutions are responsible for about 80% of this debt concession.
