Bid to sell Eurobonds in three years

Rwanda’s bid to issue Eurobonds in order to raise money to finance spending on infrastructural projects to bolster growth will commence in the next two to three years, Finance Minister John Rwangombwa said in contrast to reports that the country was set to float its inaugural global debt instrument next year.A Eurobond is issued by a country in the international markets and denominated in a currency other than its own domestic currency.Rwangombwa, rebuffed reports that Rwanda plans to sell US$300m of Eurobonds in its first global debt offering next year, saying he this was a “mere fabrication”. “I only said that we might go to the market in the next two or three years,” he said.Rwanda is exploring various cash-raising methods to meet its growing infrastructural needs in line with the country’s long term economic transformational programme.Analysts say that the idea to sell the dollar-denominated Eurobonds, targeting offshore investors is viable but requires several rounds of discussions that centre on the country’s debt sustainability obligations with its key partners such as the International Monetary Fund (IMF).Rwangombwa did not wish to divulge further details. According to market experts, the move would largely depend on two key aspects.One is whether indeed the Government wants to take the commercial lending which factors in the debt sustainability issue. The other element is the commercial viability of the funded projects including their capability to sufficiently cover all the costs as well as the repayment amounts.For the IMF, the Eurobond deal is premised on the principle that Rwanda must put in place sustainable debt management obligations before a mutually agreeable framework is reached.Dmitry Gershenson, the IMF Resident Representative, told Business Times that the country has ample chances of successfully arranging the Eurobond largely on two accounts. “Rwanda’s debt sustainability conditions appear favourable given the fact that its current debt stock stands at only 15 per cent of its GDP, which is very low on account of the debt waivers it reached with its donors. The other is that Rwanda has been classified by IMF and other multi-laterals as a country with a high capacity to sustainably manage its debts,” Gershenson said.Rwanda has lined up a list of strategic investments that needs massive funding. Among them are the new Bugesera International Airport and the Kigali Convention Centre projects. The 2012 African Economic Outlook reports that the sustenance of the country’s sterling economic performance depends partly on how such state led projects are rolled out in the coming days, a prospect that may have prompted the state planners to look at new fundraising sources.Further reports that Gershenson could not corroborate indicated that the country’s current debt sustainability discussions with the IMF are going on well. For instance, the latest reviews from IMF Headquarters in Washington DC indicates that the country’s previously arranged debts have largely been untied meaning that the country can use such commitments for projects it deems vital.The other observation is that the country debt ceiling has been increased to US$255 million up from US$240 million. Since the country has already used US$180 million of the agreed ceiling, it means that US$75 million is readily available. In the new round of discussions, it is said that discussions will most likely centre on how the facility can be extended beyond US$75 million.The new round of review is slated for September 2012 where new figures will be discussed given the country’s low debt stocks. Thereafter, the new debt frameworks have to be taken to the IMF Board of Directors in December, 2012, which has the final word on the outcomes of discussions.The seemingly complex rounds of discussions on the debt sustainability issue is what might have prompted Rwangombwa to talk about the 2013 target for the proposed Euro bond. Robert Mathu, the Chief Executive Officer (CEO) of Capital Markets Authority (CMA) says the country can issue the Eurobonds. “A country needs not have a capital market in place to issue a Eurobond. It is therefore possible to issue the bond irrespective of the level of development of the capital market of the issuing country.”