Rwanda reform drive on track as international debut bond takes off


Matthew Turner
Published on:

Issuance reflects the scramble for African sovereign bonds and country’s growing economic allure.

Rwanda has become the latest sub-Saharan African (SSA) country to issue a debut international bond, underscoring its post-conflict rehabilitation in the eyes of investors and pent-up demand for the dwindling pool of hard-currency emerging market sovereign debt.

The $400 million bond was issued with a yield of 6.875% with a 10-year maturity, to principally refinance infrastructure projects.

Investor appetite for African sovereign bonds is reflected in Euromoney’s Country Risk data, which shows an improvement in Rwanda’s access to capital markets (ATCM) indicator, up 0.5 points in the last quarter. ECR’s ATCM indicator measures the ease to which a corporate or sovereign can access market finance.


Rwanda central bank governor John Rwangombwa, in an interview with Euromoney Country Risk, explains why the sovereign shunned index buyers, and sheds light on economic reform efforts.

Why did you decide not to issue a benchmark $500 million bond?

“We came to the market for one specific reason: to refinance infrastructure projects, so we didn’t come to the market for the sake of borrowing for the budget deficit.

“We wanted really to finance various economic and structural projects, and the cost of these projects added up to $400 million.

“And when we reviewed the pricing, we thought the possible additional deficit point for not hitting the $500 million mark would be cheaper than taking just $100 million, which we didn’t have a specific project finance. So it was very much a decision borne out of financing specific projects.”

How will this bond issue affect the country’s debt sustainability position?

“Out of the $400 million we are borrowing, it is only $200 million which is new debt and the other $200 million is financing. In terms of debt numbers, government debt is 24% of GDP.

Rwanda central bank governor John Rwangombwa
“The IMF has endorsed our management style of the economy. We have ambitious programmes to develop our economy and we continue to implement reforms on an ongoing basis.

“That’s why we wanted to raise $400 million, as this figure was more applicable to our economic development and to financing specific projects.”

Will Rwandan economic policy be influenced by international market discipline?

“The debut bond issuance does bring another angle in terms of working with international investors in our economic affairs but I don’t think it is something that will bring additional pressure that wasn’t there before.

“The fact that we were able to sell our story shows that we are strong managers of the economy and committed to implementing new programmes. The projects will have a positive impact on the growth of our economy in general, but more so on increasing earning and living standards.”

Do you have plans for monetary reforms?

“We have financial sector reform plans that were approved by parliament before this bond issuance, so we have ongoing reforms.

“We have a five-year economic-development and poverty-reduction strategy, five different reforms in different sectors, and the financial sector and monetary system are integral to this plan.

“So there are no new specific reforms that we are doing in relation to this bond issuance. We maintain are reforms as planned, not just because we have come to the market.”

Are you satisfied with Rwanda’s B credit rating?

“I’m not satisfied, because I’d be happy to be an AAA country. But maybe that’s where we are.

“We agree with the rating agencies about our weaknesses, which we are trying to address in the different measures we are taking. There were two core weaknesses affecting our credit rating.

“Firstly, a narrow export base, which was a challenge to us, so we have a new export promotion strategy, which was approved in 2011 and has seen our exports grow by 20% – and we aim to expand on that.

“The other area highlighted was our high dependency on foreign aid, which was around 40% of GDP. But it is part of our government plan to reduce our dependency on government aid.

“So, overall I’m not satisfied that we are a B country, but it is good that they show us where we are and to highlight our weaknesses, which we can improve on.”

Which corporates or state-backed organizations could issue in the international markets using the sovereign bond as a benchmark?

“We don’t have any state-backed entities as we have privatized almost everything, but rather we hope private companies will take advantage of this. But it could be used by Rwanda’s national airline and Rwandan energy and utility agency.”

How does Rwanda’s bond issuance compare with other SSA sovereigns?

“Zambia had better terms than us because they are rated higher and their bond was related to their strong mineral base. So I’d say we compare favourably in terms of the composition of our economy and financial sector in the region.”