Finance Minister Yusuf Murangwa appearing before Parliament’s Budget Committee in June as they finalised the current budget
KIGALI — Rwanda is adopting a new financing approach that allows it to raise money from commercial lenders with support from the World Bank, while seeking to keep borrowing costs and future repayments manageable.
Under the latest arrangement, Rwanda will receive €82 million (about Rwf 141 billion), and a separate ¥15 billion (Japanese Yen) in financing. The ¥15 billion is worth approximately US$94 million, or Rwf 139 billion, at current exchange rates.
The financing will be repaid over 15 years, with a six-year grace period before repayment of the principal begins, according to the Finance Ministry, in a statement issued Wednesday.
The important part of the deal, however, is how Rwanda is raising the money.
The arrangement uses World Bank guarantees to reduce the risk for commercial lenders. This gives lenders greater confidence and can allow Rwanda to obtain financing on better terms than it might secure on its own.
In simple terms, the World Bank is helping Rwanda make its borrowing more attractive to commercial lenders.
The deal also spreads the borrowing across two currencies — the euro and Japanese yen — rather than relying on a single foreign currency.
The approach is part of a broader effort by Rwanda to find new ways of financing development as it seeks to diversify its sources of funding.
Rwanda has already used a similar model. Earlier this year, it secured a €213 million financing facility backed by a World Bank guarantee.
The money from the latest facility will support government programmes in areas including infrastructure, health, education, agriculture, social protection and industry.
For ordinary Rwandans, the significance of the arrangement is not simply the amount of money being borrowed, but the possibility of raising development financing at a lower cost and giving the country more time to repay it.
The six-year grace period means Rwanda will not immediately begin repaying the principal, giving the government time to put the money to use before the main repayments start.
The bigger development is therefore Rwanda’s attempt to change how it raises money for development — using World Bank backing to access commercial financing, borrowing in different currencies and securing a longer period to repay.
