Rwanda’s debt load rose to $5.4 billion last year from $4.8 billion in 2017, as per the latest World Bank data.
Kigali has repeatedly defended the country’s debt level, which is this year projected to rise to 49.1 per cent as a ratio of GDP, from 40.7 per cent last year.
Much of Rwanda’s debt though, is long long-term, with repayment period of up to 40 years, according to the Ministry of Finance.
But the biggest test for the country’s debt burden is expected to come in 2023, when repayment of its $400 million Eurobond will fall due.
The settlement is expected to put pressure on government coffers, even though Kigali still has the option to issue another Eurobond to retire the maturing one like Nairobi has been doing.
The International Monetary Fund has been pressing the government to improve its financial transparency and analyse fiscal risks that could lead to surprises in the economy during the repayment period.
“Rwanda did very well by increasing its domestic revenues by six percentage points to GDP in the decade lead up to 2016. But it kind of stagnated since then,” the IMF Head of Mission to Rwanda, Laure Redifer, told The EastAfrican.
“So we want to look at ways to regain that momentum and we are looking at having a medium-term revenue strategy and tax incentives. But it is all about balance because you do not want a tax burden that is scaring away business.”
Rwanda’s growing debt has been mainly fuelled by large investments like the multi-million dollar Kigali Convention Centre—completed in 2016—for which Rwanda borrowed $130 million.
The expansion of the national airline, RwandAir, which included increases in the size of the fleet at a cost of about $169 million on top of aircraft leases valued at $86 million, also saw its debt rise. This was in addition to the construction of a new airport in Bugesera district, for which Rwanda borrowed $80 million.