{{The Government of Rwanda will on August 27, 2014 issue a 5 year fixed coupon rate treasury bond amounting to RwF 15 billion. The investor book will be opened from 25th till 27th August 2014. }}
The book building method will be used to determine the price. The purpose of the bond is to facilitate the development of the capital market, as well as fund infrastructure projects.
The bond issuance is part of a Government’s comprehensive Treasury bond issuance plan for Fiscal Year 2014/2015.
This bond follows a successful 3-year bond issued in February 2014 which was oversubscribed by 140% signaling investor confidence in the outlook for Rwanda’s currency and economy.
This bond provides an additional investment opportunity that is attractive. It is risk free since it’s guaranteed by government, very liquid as Bonds can be sold anytime on Rwanda Stock Exchange, ensures a good investment return and can be pledged as collateral for any loan.
Furthermore, it has been granted tax incentive as withholding tax on interest has been reduced from 15% to 5% for EAC resident tax payers investing in three years and above.
The issuance strategy for FY 2014/2015 was derived from a broader strategy, “the Government medium term debt strategy” which suggests that domestic debt financing requirement in Fiscal Year 2014/2015 should not exceed a level of one per cent of projected GDP, in order to avoid crowding out the private sector.
The suggested amount of RwF 15 billion Treasury bond will be sufficiently enough to support the liquidity during the first quarter of Fiscal year 2014/2015, and will represent 37% of total domestic financing to be issued in 2014/2015 as per annual budget approved by parliament.
The choice of the maturity (5 year) will help to attract a broad investor base (both local, regional, and international) thereby reducing the risk of declining investor interest in specific maturities.
Furthermore, it will ensure a smooth repayment profile that will reduce the risk of refinancing very large volumes of debt in unfavorable market conditions while keeping sustainable levels of debt.
The government overall domestic debt represented 6.6 per cent of GDP as of end 2013.
It was constituted of 36% of medium term debt (treasury bonds) against 64% of short term notes (treasury bills).
Going forward the objective is to increase the share of medium term domestic debt up to a level of more than 40% of total domestic debt, while reducing short term debt and contribute to the development of domestic capital market.
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