The government allay fears over the current debt levels despite the shift from low to moderate risk of external and overall debt distress.

In the Budget Framework Paper presented to the two chambers of parliament last week, it emerged that in nominal terms, Rwanda’s total public debt stood at 71.3 per cent of GDP as of end December 2020. This represents an increase of 13.3 per cent of GDP compared to the stock of 2019.

However, Richard Tusabe the Minister of State in charge of National Treasury in the Ministry of Finance and Economic Planning allayed fears of Members of Parliament saying that debt carrying capacity is still consistent with a classification of Strong performer, thanks to a transparent, accountable and strong prudent debt management.

The Budget Framework Paper noted that the recent increase in debt was driven by additional concessional borrowing to finance public investment in energy, education, health as well as Covid-19 related financing. A significant majority of debt, 86.7 per cent is concessional.

Concessional loans is credit that is extended on terms substantially more generous than market loans usually by international development financiers, such as the World Bank, African Development Bank, among others.

The loans have significantly low-interest rates and long grace periods with the possibility of revising terms further.

Tusabe told MPs that there is no cause for alarm despite the increase noting that there is still much room before the debt is considered high risk.

"While the debt levels have gone up ever since the pandemic began by about 13 per cent from before the pandemic when the debt was classified as low and by now it is moderate. There is still a lot of room before we are classified as high risk. We are taking measures now including strengthening our private sector to have a greater role in the economy. Also, the money is concessional, cheap loans with good repayment periods,” he said.

Responding to press inquiries on the subject, Central Bank Governor John Rwangombwa said that the increase in debt levels was necessary considering the pandemic but added that there is always prudence as a country with regard to debt management.

"When I look at government plans going forward, the commitment is that debt remains sustainable, I don’t think that there is any big challenge, we do not have challenges in debt service,” he said.

Experts including Donald Kaberuka have previously noted that thresholds and targets around debts only serve to raise alarm and are often not relevant with specific social economic context of countries.

Rather than look at thresholds, the argument is that stakeholders ought to look at debt repayment capacity.