October 26, 2020

Rwanda’s Public Debt Will Soar to 67% of GDP by Year End

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At bus park in Kigali, the tough COVID-19 containment measures are all visible. While they have heavily controlled the virus, the economy has been severely bruised

By end of 2020, Rwanda’s total debt will grow to a whooping 67 percent of the country’s gross domestic product or GDP, the International Monetary Fund said Monday.

In End-of-Mission statement following virtual meetings with Rwanda officials, the IMF team says after months of a severe battering as a result of the COVID-19 pandemic, economic activity has started to show signs of recovery following a sharp contraction in the second quarter of 2020 and the stringent containment measures.

The monetary and financial measures and large fiscal package deployed in response to the crisis, indicates the Fund, have played an important and welcome role in supporting the economy. Given the size of external shocks and the domestic shock caused by containment measures, real GDP growth is now projected to contract to -0.2 percent in 2020 and rebound to 5.7 percent in 2021.

The banking system has remained stable, liquid and well capitalized, says IMF. Tax revenues have been stronger than expected, suggesting the Rwanda Revenue Authority (RRA) is seeing good results.

“….expenditures are also expected to be higher, as the fiscal measures to support vulnerable families and hard-hit firms were extended, and public investment execution will be fast-tracked,” say the IMF team led by senior regional official Haimanot Teferra.

“In this context, the overall fiscal deficit is projected to be 8.5 percent of GDP in FY20/21, with public debt projected at 67 percent of GDP at end-2020.”

This will mark a significant rise in the country’s debt. The ministry of finance and economic planning announced in late April that as of 2018, the country’s total debt was estimated at $4.9 billion – most of which is concessional, representing 53.6 per cent of GDP.

On a positive note though, Rwanda is in a group of 25 countries under the IMF’s debt relief plan and has been enjoying up to $11 million in debt service relief from the IMF for a period of six months.

However, data published by the joint World Bank and G20 Debt Service Suspension Initiative (DSSI), shows that Rwanda declined to take part.

For month of October, Government’s total disbursement (both interest and principal) to repay international creditors will be $7.2m, then rise to $16.5m in November. As for December, government will pay $5.1m.

But all is not all gloom. The IMF team that engaged Rwandan officials in their latest workings, says it expects the public debt will come down to 65% of GDP in the post-COVID period considering the fiscal policies being implemented and others planned.

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