May 10, 2021

Rwanda’s Debt Grows to Over $7.2bn

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Entrance to the special economic zone in Kigali

Rwanda’s public debt had been projected to reach 67% of GDP by end of last year, instead it has expanded to over 70 percent.

The latest review by the International Monetary Fund shows that the country’s debt is on a steady spiral with no end in sight.

As of December last year, Rwanda’s public debt was 71.3 percent of GDP. With the current GDP estimated to be around $10.2billion, Rwanda owes its local and international lenders up to $7.2bn.

When allocated to each Rwandan as par the 2020 population figures, it shows that each citizen has a share of over $570 (over Rwf 566,000) from the debt.

“….looking ahead, risks to the fiscal and debt outlook have heightened,” says the IMF in a statement issued Friday last week.

“The fiscal deficit in the current and next two budget years is projected to widen further owing to the need for increased spending to, inter alia, accommodate the COVID-19 vaccine rollout, hire new teachers to minimize scarring from human capital loss, and provide support to the private sector and state-owned enterprises.”

The worst is however yet to come. The Fund said the debt burden will actually go up to over 80 percent of GDP by end of 2022.

Regionally, Uganda’s debt as of end of 2020 was 47 percent, leaving the country to spend over 97% of domestic revenue on debt repayment.

Kenya’s debt to GDP ratio stood at 65.6%, with the government planning to use over 70% of its revenue to pay debts.

As for Tanzania, the debt has reached 55%. Burundi and South Sudan have much lower ratios but their economies are still facing more challenges.

Rwanda continues to grapple with the fallout from the COVID-19 pandemic.

Economic activity contracted by 3.4 percent in 2020. While a second wave of infections led to a three-week lockdown in Kigali in early 2021, a gradual lifting of restrictions is currently underway.

Growth is projected to rebound to 5.1 percent in 2021, supported by the national vaccination campaign targeting 60 percent of the population by end-June 2022 and continued government support to hard-hit businesses and vulnerable households.

The banking system continues to be stable, liquid, and well capitalized, but the pandemic has contributed to the buildup of credit risk.

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