{{President Paul Kagame this week revealed more details of Rwanda anticipated debut Eurobond issue. Rwanda is set to take advantage of low borrowing costs in international debt markets.}}
Since much of its overseas aid was cut off by some international donors, the Rwandan government has faced problems filling the gap in its budget.
The issue of Eurobond was raised in the recently passed Rwandan government budget with reports suggesting the sale will raise in the region of $350m.
According to the Rwandan government, the money would be spent on infrastructure to maintain growth in an economy that has been expanding at more than 8% a year over the past decade.
President Kagame was quoted by Bloomberg at a conference in Miami this week saying that the Eurobond issue will be completed by the end of July this year.
Rwanda is not the only country in sub-Saharan Africa that have been putting together plans to for Eurobond sales.
In September last year Zambia issued its Eurobond which was massively oversubscribed and produced a yield of around 5.5 % – allowing the southern African nation to borrow at a similar cost to major European economies like Spain. Zambia Eurobond issue was successful as the country raised $ 750m.
In recent weeks, Angola has announced plans for a $1bn issue this year and Tanzania has raised $600m through an oversubscribed according to the FT.
With yields on their outstanding Eurobonds hovering around 4.5 % in recent months, Nigeria and Ghana are expected to follow with additional dollar-denominated issues this year.
Investors are expected to positively react to Rwanda`s offering for its foreign investor-friendly economic governance.
Rwanda is ranked second among sub-Saharan African countries in the World Bank`s ease of doing business, behind South Africa, and is highly regarded by rating agencies – Standard & Poor’s and Fitch both rate it B. according to a blog by Andrew Bowman.
Andrew Bowman argue that the most recent government budget outlines a large program of spending reductions in response to aid cuts, which are expected to slow Rwanda’s GDP growth to 7.1% this year from the central bank’s previous forecast of 8 %.
Stephen Charangwa, a frontier market fixed income specialist at Silk Invest, told beyondbrics.
“I would be surprised though if it yielded close to Zambia. It’s more likely to be around 6%. Apart from the positives of the strong institutions and good governance, it’s a small economy, without either the consumer play of somewhere like Nigeria, or the significant natural resources of Zambia.
“But with the market looking for supply from the region, and Rwanda’s good macro-economic fundamentals, I think it will be well received.”
{Financial Times}
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