Rwanda has raised $620 million in its second-ever Eurobond, the Ministry of Finance has confirmed. A Eurobond is a debt instrument denominated in a currency other than the home currency of the country. Bonds are issued usually in terms of ten years or more, they are therefore long term investments. According to officials from the Ministry of Finance, the bond has an interest rate of 5.5 per cent with a 10-year maturity. The proceeds of the bond according to the Finance Ministry will be used partly to refinance Rwanda’s existing Eurobond which is due in May 2023 to maintain the country’s debt management strategy. This, the ministry said, will serve to proactively address the upcoming debt burden. Part of the proceeds will also go into funding priority projects that will support recovery following the slowdown triggered by the COVID-19 pandemic as well as strategic investments in health and agriculture to enable export growth. Other consideration, government said, include safeguarding environmental protection and mitigate adverse effects of climate change Officials say that the bond’s issuance was over-subscribed receiving orders of over $1.6 billion. Oversubscription of a bond implies that there was higher demand than going beyond the amount sought. This can be considered a positive stance especially with the global economic recession and slowdown which has left investors uncertain of markets. According to officials, a significant part of the demand for the bond was from existing bondholders of the 2013 bond who tendered 84.5 per cent of their existing holdings This is Rwanda’s second Eurobond following the inaugural one issued in 2013 of $400 million that was due to mature in 2023. The New Times understands that the sale was processed by Deutsche Bank, a German investment bank and Citigroup, an American Investment bank. John Rwangombwa the Central Bank Governor welcomed the investors’ response to the Eurobond issuance. He said that the lower yield, (5.5 per cent compared to 6.625 per cent of the 2021 Eurobond) is ideal in reducing the interest repayments. “The lower yield of this issue will result in a reduction in our annual interest payments over the next 10 years, strongly contributing to our debt sustainability strategy. The funds raised will accelerate strategic projects in productive sectors that will further boost the country’s economic transformation efforts,” Rwangombwa said. Minister of Finance and Economic Planning Dr. Uzziel Ndagijimana said that the sustained high economic growth in recent years had led to investor demand. Experts say that the bond’s issuance timing is ideal as global investors are seeking reputable markets to invest in following a global drop in treasury yields in most developed markets starting early this year due to the state of the economy. At a 5.5 per cent coupon rate, Rwanda’s bond was attractive enough for a majority of global investors hence the oversubscription. The global liquidity also allowed Rwanda to set a lower yield of 5.5 per cent compared to 6.625 per cent of the 2021 Eurobond which means it will be cheaper repaying the new bond. The proceeds of the 2013 Eurobond played a key role to finance the completion of projects such as Kigali Convention Centre as well as RwandaAir expansion programme. At a time when the country has a number of projects in need of financing, the bond could help increase consumption in the local economy thereby creating jobs, experts add.
