Rosier fu­ture as Rwanda gets star bor­rower rat­ings

Moody’s’ nod is a wel­come re­lief as Ki­gali seeks re­sources to fi­nance its am­bi­tious de­vel­op­ment projects

The East African - - NEWS - By BERNA NAMATA The Eastafrican

Rwanda has re­ceived the green light to con­tinue bor­row­ing in for­eign mar­kets, af­ter global rating agency Moody’s this week af­firmed its B2 long-term rating.

In its lat­est as­sess­ment, Moody’s noted that al­though Rwanda’s debt bur­den has risen in re­cent years and is un­likely to de­cline in the next few, the coun­try’s demon­strated in­sti­tu­tional strength will al­low the gov­ern­ment to main­tain macroe­co­nomic and fi­nan­cial sta­bil­ity and can man­age this bur­den.

“The qual­ity of Rwanda’s in­sti­tu­tions sup­ports the gov­ern­ment’s abil­ity to man­age the risks as­so­ci­ated with a higher bur­den. Rwanda has a record of ef­fec­tive pol­icy im­ple­men­ta­tion and re­form,” said the agency.

The rating comes at a time when Ki­gali is un­der pres­sure to mo­bilise re­sources to fi­nance its am­bi­tious de­vel­op­ment projects, par­tic­u­larly in in­fras­truc­ture, to boost growth and en­hance trade links with the re­gion.

Key strate­gic projects in the pipeline that have huge fi­nanc­ing needs in­clude the 400km stan­dard gauge rail­way line link­ing Ki­gali to Dar es Salaam via Isaka, and which is ex­pected to cost about $2.5 bil­lion.

The two coun­tries will co-fi­nance the project.

Rwanda needs to raise at least $1.2 bil­lion for 150 kilo­me­ters of the rail­way to fa­cil­i­tate cross-bor­der trade as high trans­port costs have long un­der­mined its com­pet­i­tive­ness.

Busi­nesses have to spend a min­i­mum of about $4,990 per 20ft con­tainer of goods through the Cen­tral Cor­ri­dor. The cost is even higher through the North­ern Cor­ri­dor at ap­prox­i­mately $5,000 for the same ton­nage.

Pre­lim­i­nary stud­ies show that it will cost $2,500 if the con­tainer were to be de­liv­ered by rail.

Note­wor­thy in­ter­est

“It will be a game changer… This is a sig­nif­i­cant cost re­duc­tion of about 40 per cent. It is very dif­fi­cult for our ex­ports to be com­pet­i­tive if you fac­tor in the trans­port costs which are al­ready high. How­ever, once trans­port costs go down, we will be­come more com­pet­i­tive on the ex­port mar­ket,” said Jean de Dieu Uwi­hanganye, Rwanda’s State Min­is­ter for Trans­port in May.

Mr Uwi­hanganye said both coun­tries are still dis­cussing the fi­nanc­ing model though they have re­ceived note­wor­thy in­ter­est from in­vestors.

“The ne­go­ti­a­tions be­tween the two coun­tries (Rwanda and Tan­za­nia) are mov­ing quickly be­cause of the in­struc­tions we re­ceived from our heads of state,” Mr Uwi­hanganye said.

The SGR from Mom­basa port via Uganda was ex­pected to cost Rwanda close to $1 bil­lion, ini­tial stud­ies had shown.

Tan­za­nia has al­ready started con­struc­tion of the rail­way in two phases from Dar es Salaam to Moro­goro cov­er­ing 330km, and from Moro­goro to Maku­tu­pora in Dodoma cov­er­ing 426km, us­ing lo­cally sourced funds to the tune of about $3 bil­lion, ac­cord­ing to Pres­i­dent John Magu­fuli.

Rwanda also needs funds for Buge­sera In­ter­na­tional Air­port whose con­struc­tion com­menced in Au­gust 2017.

The air­port will com­ple­ment the growth of the na­tional car­rier Rwandair and im­prove ac­cess to the coun­try.

Con­struc­tion works have been planned in phases for a total $765 mil­lion.

The first phase is es­ti­mated to take about 27 months and end by 2019 at a cost of about $400 mil­lion. At the be­gin­ning, the air­port will be able to ac­com­mo­date about 1.8 mil­lion pas­sen­gers per year.

Rwanda’s ex­ter­nal debt stock re­mains among the low­est in the re­gion as a re­sult of pru­dent macroe­co­nomic, and debt man­age­ment, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund.

Rwanda’s ex­ter­nal debt level to GDP was at 36.6 per cent which is be­low the East African thresh­old of 50 per cent.

Do­mes­tic debt stands at about 10 per cent. of

The good news is that the re­cent surge in ex­ports will help fi­nance ex­ter­nal debt pay­ments.” Thomas Alun, IMF Res­i­dent Rep in Rwanda

Pic­ture: Cyril Ndegeya

Pres­i­dent Kagame lays the foun­da­tion stone to kick off con­struc­tion of Buge­sera In­ter­na­tional Air­port.

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