Plan to issue $350m bond nears end

The government has started moves to issue a $350m (about Rwf222b) international bond to infrastructure projects, officials at the Ministry of Finance and Economic Planning have said.“Bond issuance is a process. We are undertaking these steps as we prepare to issue the bond,” Finance minister Claver Gatete told The New Times in an e-mail interview, on Monday, while explaining the country’s plan on the first ever international bond issue. Amb. Gatete did not give the details of the process. He, however, said government was assessing the market for the best opportunity to sell the bond. The plan to issue an international bond was announced last month when officials were adjusting the 2012/2013 financial year budget.“The bond issuance will happen at a time that the government feels that market conditions are attractive so that we raise less expensive funds from the international market,” he said. Plans to sell the bond before the end of the current fiscal year was also confirmed by President Paul Kagame, late last week, in an interview with US-based Bloomberg News. The President said the country would sell its first international bond by the end of July. He said Rwanda is on a “good path” towards achieving its economic development, plans that are reflected in its vision to turn the country into a middle-income economy by 2020, adding that Rwandans were ready to face challenges and benefit from its opportunities. Amb. Gatete said the country’s successful issuance of a debut international bond would be a good sign for its economy in many ways. He explained that bond issuance was a form of financing widely used by developed countries to raise funds that the public sector or private sector intends to invest for returns or for the benefit of public interest. Undertaking of the move for the first time is significant, he stressed. “It is a sign of maturity on how we manage our economy and a strong signal to the investment that Rwanda is ready to do business,” the minister said, adding that government is looking at a tenure of 10 years. Analysts call for cautionThe government wants to use the funds raised by the bond issue to bankroll big projects, including capitalising RwandAir or easing its loan burden, as well as constructing the Kigali Conference Centre.The then Finance minister, John Rwangombwa, told Parliament in February that both projects were important and would boost the country’s ability to attract foreign exchange through increased offer of international services.Analysts say the plan to issue sovereign bonds to international markets should be carefully executed, especially with focus on sound management of funds raised, because the economy would significantly gain or lose depending on how it is handled.“They have to be careful because we may end up getting another loan to repay the investors,” says Prof. Josephat Bosire, a lecturer of finance and investment at Mount Kenya University, Kigali campus.He said if the loan is successfully repaid, it would improve Rwanda’s credit rating, giving the country leverage to borrow more funds to invest in development projects in future.The government revised upwards the 2012/2013 budget last month, increasing by 12 per cent to hit Rwf1549.9b, up from Rwf1385.3b that was approved last year. The government will partly finance the revised budget by issuing international bonds.

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Plan to issue $350m bond nears end