Investors snap up Rwanda’s bond

LONDON, UK – Rwanda’s $400 million bond offer was oversubscribed last week, confirming investors confidence in the economy of the East African Community member state.
Investors around the world bid more than $3 billion for the 10-year bond intended to mostly pay for new infrastructure development.
Rwanda has remained a higher performer in the World Bank’s Doing Business annual survey which has also helped attract investor attention.
Mark Bohlund, an economist who follows sub-Saharan Africa for IHS Global Insight said,
“Turning to global financial markets will allow Rwanda, whose population is largely rural and who last year posted per capita income of just $664, to diversify its sources of funding and to ‘narrow the funding gap for its infrastructure investments.”
In a statement last week, the Kigali government said the ‘issuance of the bond reflects Rwanda’s push to become less dependent on international aid’.
The geographical breakdown of investors was 40 per cent from the United States, 33 per cent from Britain, eight per cent from Switzerland, six per cent from Asia, five per cent from Belgium and Luxemburg and four per cent from Germany. The majority of them — 83% — are fund managers and 10% are banks. ‘It wasn’t as oversubscribed as Zambia in September last year, but still shows a healthy appetite for Sub-Saharan African sovereign debt,’ Bohlund of IHS Global Insight said. Fitch and Standard and Poor’s (SP) both gave a ‘B’ rating with outlook stable to the new sovereign debt. ‘Rwanda’s rating is supported by solid economic policies and a track record of structural reforms, macro-economic stability and low government debt’ (23.3% of GDP in 2012), Fitch said in a statement. SP for its part focused on Rwanda’s success in poverty reduction. But both agencies warned of ‘structural weaknesses’, citing low per capita GDP, an economy not sufficiently diversified and a ‘narrow and volatile export base’. Recently, an International Monetary Fund (IMF) mission, led by Paulo Drummond, visited Kigali to conduct the sixth review under the Policy Supports Instrument (PSI). Among other things, the Mission concluded that Rwanda is doing well. According to a statement: ‘Economic activity has been quite resilient. Despite a modest slowdown in the second half of the year, gross domestic product (GDP) growth was 8 percent in 2012, driven by the expansion of the construction and service sectors. Meanwhile, inflation pressures have eased as the supply shock of high food and fuel import prices has wound down. However, pressures in the foreign exchange market, starting in the second half of 2012 and partly related to high private sector credit growth, led to a sharp contraction in the foreign reserves of the National Bank of Rwanda even though the NBR limited its sales to the market.

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