On Monday, August 2, Rwanda completed its second-ever Eurobond raising $620 million at an interest rate of 5.5 per cent with a 10-year maturity.

This comes at a time when the 2013 Eurobond was less than 2-years to maturity and the country was seeking resources to drive economic recovery.

The New Times’ Collins Mwai spoke to Richard Tusabe, Minister of State in charge of National Treasury at the Ministry of Finance and Economic Planning for insights on the impact on debt stock, the profile of investors, projects to be funded among others.

Excerpts below:

Of the resource mobilization options, why was the Eurobond found to be most feasible?

If you look at the current debt portfolio, its mainly concessional loans, we moved from about 83 per cent to 92 per cent in 2020. But, concessional loans also have limits. The space for concessional lending also has some conditionality hence having to go back to the market.

But going back to the market, one has to ensure that the pricing is right, and that there is capacity from an affordability point of view. But even with the commercial debt that we are getting, we are still within the 80 per cent range in terms of concessionality. It is a good portfolio mix.

The 2013 bond is maturing in 2023, so it would put us under pressure to make the repayment, so we decided to go back to the market, reduce the burden now because we have some of the existing bond holders who have bought into the new bond to the tune of about 84 per cent. That gives us less burden and enables us to smoothen debt levels up to 2030.

What is the effect of the new bond on Rwanda’s debt stock?

There is not much pressure because the new bond has a 10-year maturity. The fact that we have reduced the burden that was coming in 2023, it will bring down our debt levels and we can then smoothen out the future.

We think that by 2030-2031, we should be getting back to about 65 per cent of debt to GDP. But that requires a lot of effort, one needs to be very intentional about that, we are doing that through fiscal consolidation. Between now and 2024, we think we can add about 1 per cent in terms of tax to GDP.

We are also going through expenditure rationalisation. If you look at the budget, in 2019/20 expenditure grew by about 15 per cent while in the current one, we grew by about 10 per cent. That means we are still spending money, the reason why we are doing that is that if you want to recover faster, you need to spend but in productive sectors.

Some would say that the bond was done somewhat quietly especially in comparison with the 2013 one where there was above the line promotion. Why so?

Even this time, there was promotion. Last time, it was above the line because we had to make physical roadshows and meet investors physically. This time because of Covid-19, we were meeting investors for hours virtually for days. We met over 30 investors and they really got into details.

Some would say that the timing of the bond was interesting considering that yields in advanced global markets are quite low hence coming in at a time when there was liquidity…

The timing was right in that Rwanda story is one that any investor would want to be part of. The yield of 5.5 per cent is good. Global trends have a big say in this, there is a lot of money looking for a safe home and Rwanda is one of the places you can put your money comfortably.

While the timing was right, Rwanda is an attractive opportunity for investors.

For us, it is also important to understand why we go to the market, we are very prudent in our macro-economic management and debt sustainability.

We only go to the market when we need money, which is why we did not go for the $1.6 billion which was available, we went for what was in line with our appetite. We are going to maintain that discipline and ensure that we only get the money that we need and use it to drive recovery and growth.

From your interactions with them, what did you find to be the key reasons behind the investor confidence?

Over the last two decades, we have been growing steadily. It has not only been growth but inclusive growth, we have reduced poverty levels, and our GDP per capita has also been growing. The macro-economic approach has been very sound with regard to managing debt levels, managing inflation, and managing currency depreciation among others. The discipline of macro-economic management. The fact that investors have a track record of Rwanda, it has given us an easy story to sell to investors.

What is the profile and composition of these investors? Who are they?

We can summarize them as about 40 per cent from the US and Europe, Asia and Africa. It’s mainly fund managers, pension funds and other asset managers. It is quite diverse. With a demand of $1.6 billion as was the case, one needs to ensure that there is diversity among the profile of investors. It is a tough task to allocate when you have a reception of $1.6 billion whereas you were seeking $620M.

Where exactly will these funds be spent?

It is all aligned to economic recovery. For instance, agriculture has been very resilient. Even the 3.5 per cent growth we had this year, was buoyed by good performance in the sector with focus on horticulture and exports promotion.

There is health. Covid-19 has stress-tested our health systems. We must find a way to strengthen further. We have investments in RwandAir where we have been servicing some costly debts, we can pay off some and remain with a lower debt. As you are aware, we are getting into another phase with our partners Qatar Airways with the Bugesera Airport Project coming up.

As Rwanda receives the funds, what are the consequent steps to ensure there is value for the debt?

The role of the private sector going forward. With the funds that are coming, are we ready, government and private sector. The new Economic Recovery Fund that we have has enabled us to support the private sector, we are also getting into another window with the support of the World Bank and Asian Investment Bank. Because we created a fund manager as a bank that understands the development side of things, accesses the projects, and advises the business community, so going forward we are looking at ensuring that the private sector is ready.