Rwanda is planning a pilot program that will enable district entities to start issuing bonds to scale up their long term sources of revenues.
This was discussed at stakeholder’s workshop this Wednesday in Kigali, which brought together Ministries of Local Government, Finance and Rwanda Capital Markets Authority (CMA) among key players in the programme.
The Permanent Secretary of Ministry of Finance, Caleb Rwamuganza said that in preparation for issuing the municipal bonds, district need to clean up their finance standings and endeavor on clean audit reports.
“Municipalities need to clean their houses especially on revenue collection. You can manage your revenues properly so that you can be able to pay back the issued bonds,” Rwamuganza said during the meeting.
Asked on how much and when will this programme start, Capital Markets key players said that this goal is achievable with clean audits and a roadmap on how issuance of municipal bonds will be conducted.
“An engagement, through a pilot programme, between relevant stakeholders and municipalities is ongoing, to prepare them towards their readiness for municipal bond issuance. Your both questions will be answered once ready,” said Eric Bundugu.
Capital market industry plays a vital role in sustaining economic growth and maintaining financial stability.
For the Fiscal Years 2018-2019, a total of eight bonds were issued, with four new issuances and four bond reopening as part of regular issuance plan, BNR said in an earlier statement.
So far 21 bonds in total have been rolled out to the public since 2014 when government took a firm commitment to issue bonds on a quarterly basis with various maturities ranging between three, five seven, ten and 15 years.
Growth in outstanding Treasury bonds for example increased to Rwf180.0 billion at end 2017 from Rwf152.5 billion at the end of 2016.
Municipal bonds are loans that investors offer to local government. They are issued by cities, states, counties where applicable, or other local governments. For that reason, the interest they pay on the bonds is tax-free.
The length of the muncipal is almost similar to treasury bonds. Normally bonds with longer maturities say 10 to 30 years, will pay more than short-term bonds of less than 10 years.
Municipal bonds pay interest to investors, usually twice a year. Bond issuers repay the principal on the bond’s maturity date. That’s one to three years for short-term bonds and 10 years or more for long-term bonds.
Most people buy municipal bonds through their financial advisor, bank, or even the municipality directly.