Rwanda Defies Global Shocks, Successfully Repays $400 Million Eurobond Amid Pandemic and War

Rwanda has successfully repaid its $400 million Eurobond despite the pressure on its finances caused by the Covid-19 pandemic, the war in Ukraine, and the appreciation of the US dollar. The payment, which was due this week, was successfully completed, according to the EastAfrican media outlet. The International Monetary Fund (IMF) was able to provide finance, allowing the government to save money, according to representatives of Rwanda’s Ministry of Finance and Economic Planning.

The government of Rwanda set aside $63 million as part of the International Monetary Fund’s Special Drawing Rights (SDR) allocation that it received in 2021 as support to fight against the impact of Covid-19 on the economy. This foresight and proactive measure by the government significantly reduced the risk of default and allowed a successful repayment of the remaining 15.1% of the 2013 Eurobond, according to the ministry.

Rwanda was able to reduce its debt load during the pandemic by using the second $620 million Eurobond, issued in response to the low-interest rate environment, to pay back a portion of the $400 million. The coupon rate on the $620 million 10-year Eurobond issued in April 2021 was 5.5%, lower than the 2013 rate of 6.625%. Over the following ten years, the lower yield resulted in a decrease in its yearly interest payments, which helped make its debt manageable.

The government of Rwanda has borrowed heavily in recent years to support economic recovery and development initiatives, resulting in public and publicly guaranteed debt growing substantially to 78.3% of GDP in 2021 from a pre-pandemic ratio of 60.7% of GDP in 2019. However, with long maturities and low-interest rates, development finance institutions are responsible for about 80% of this debt’s concessions. With its proactive measures and foresight, Rwanda has been able to manage its debt and maintain economic stability despite the ongoing global shocks.