The changing face of Rwanda's public debt

In 2005-2006 Rwanda benefitted from massive external debt cancellation by the international community under the enhanced Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI). As a result, the country’s public debt sustainability was effectively restored and the Rwandan government was given a clean slate, on which a new, hopefully more successful debt policy could be written. This paper reviews how Rwandan public debt has evolved in the aftermath of debt relief and which priorities were put forward in the debt policy of the Rwandan government. We pay particular attention to public debt instruments which are new or of growing importance in the Rwandan context, i.e., non-traditional donor loans, the 2013 Eurobond, and longer-term local currency bonds. We also shed light on the implications of the post-relief debt accumulation for Rwandan debt management and for future debt sustainability. Finally, we consider the interaction between traditional donor finance and public debt in Rwandan by looking into the impact of the donor aid suspension of 2012 on public debt composition and on various fiscal and macroeconomic indicators. We conclude that, overall, Rwanda has been prudent in re-accumulating debt and in diversifying its sources of public finance, although the transition to a well-balanced equilibrium debt portfolio has not been without problems. The 2012 aid suspension, for example, had important implications for the development of the domestic debt market, next to broader fiscal and macroeconomic ramifications.