Rwanda has borrowed extensively in the past month to mitigate against the adverse effects of the coronavirus pandemic, accruing an accumulated debt of close to $200 million in March alone.
By the end of 2018, the country’s total debt was estimated at $4.9 billion (most of which is concessional), representing 53.6 per cent of GDP, according to the Ministry of Finance.
The International Monetary Fund and World Bank both agree that the loan is manageable and below the debt distress alarm.
In this pandemic period, Rwanda has borrowed $109 million from the IMF, $14 million from the World Bank and $1 million in the form of aid from the United States.
The EU also approved a grant of $56 million, while the government can also tap into $10 billion made available by the African Development Bank through its Covid-19 Response Facility for African states.
The government’s austerity measures—such as the suspension of April salaries for majority of public officials—will help to ease government expenditure.
But the debt distress is now higher, considering that all economic activities are suspended across the country, which means less tax collection and revenues from exports. This is on top of the millions of dollars being lost from cancellation of conferences and summits, and the grounding of the national carrier, RwandAir.
Rwanda is also in a group of 25 countries under the IMF’s debt relief plan and will receive up to $11 million in debt service relief from the IMF for a period of six months.
By the time of going to press, government officials had declined to comment on the national debt.
Rwanda will also get breathing space after the G20 announced last week on Wednesday a suspension of debt service payments for the world’s poorest countries starting May 1, until the end of 2020.
A donation from the Jack Ma Foundation of 20,000 test kits, 100,000 masks and 1,000 protective gear, has been significant in saving the country from spending a fortune on buying the same.
Rwanda’s economy was on an impressive trajectory before the coronavirus pandemic in March, growing at an average of eight per cent, with the IMF predicting that this growth could remain or improve to 8.5 per cent for 2020 and 2021.
Now, as the coronavirus ravages the world, both IMF and Rwanda have cut the country’s growth forecast to 5.1 per cent.