July 31, 2019

Prime Minister Puts Rwanda Debt At 29% Against GDP, Below World Bank And IMF Numbers

Germain Nsanzimana July 31, 2019

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Delegates inside the 42nd meet of the African Association of Central Banks taking place at the Kigali International Conference Center

Rwanda’s debt remains relatively low against the regional threshold of 50 percent, Central Bank governors from the regional bloc heard in Kigali.

Rwanda is hosting the African Association of Central Banks (AACB) annual symposium, bringing together the continent’s top bankers. At the same time, central bank governors from the East African Community (EAC) are also holding their periodic consultative meeting.

Among the major issues on agenda is what Africa should do as it finds itself being lambasted by the west for supposedly taking up too much Chinese loans. The Americans have called it a ‘debt trap’.

Opening the continental body AACB meet, Rwanda’s Prime Minister Dr Edouard Ngirente said debt in itself isn’t a bad thing as long as its well spent.

“In fact, debts can foster economic growth, and borrowing responsibly, maximizing our returns on the investments, and managing our debts is key to keeping the debt levels sustainable,” he said.

“It is therefore important to keep in mind that the act of borrowing itself is not inherently a bad act.”

He welcomed joint efforts by African central banks to support governments’ policies such as the African Continental Free Trade Area.

Turning to Rwanda, the Prime Minister put the country’s debt levels at 29% of GDP, while other neighbors struggle with ballooning debt.

“In Rwanda, the debt sustainability analysis shows that the risk of Rwanda’s debt remains low even though the net present value of debt to GDP has been increasing overtime, reaching 29% in 2018 % against a threshold of 50%,” said Dr Ngirente, in the speech on behalf of President Paul Kagame.

In March, the International Monetary Fund said a debt sustainability test had found Rwanda’s debt to GDP at 32.9% as of the end of last year.

Then in late June, the World Bank also released its own update which gave the same debt figure as the IMF.

There are no exact numbers of Rwanda’s debt in terms of money, but some estimates put it at $3.5b of the nearly $10billion total GDP.

What is known, is how much government allocated to debt repayment in its 2019-2020 budget unveiled on June 14.

Rwanda has put Rwf 128billion or about 4.4% of the current budget to servicing debt, as reported by The Chronicles.

Compared to regional neighbours as far as how much of the budget is allocated to debt repayment, 33% of Kenya’s budget will be for debt servicing, Uganda put 34 percent as some 24% of Tanzania’s budget goes to repayment.

Other EAC members’ debt to GDP is above 40%, except for South Sudan and Burundi whose figures are unknown.

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