When Rwanda’s first dollar bond was announced last year, little did government economic planners know it would sell like cake on international money markets. The issue rate was set at $400m, but at today’s debut, investors put together more than US$3.5billion.
The successful issuance of Rwanda’s first international bond is a sign that the country is on the path to economic maturity, said Finance Minister Amb Claver Gatete in a statement Thursday evening.
“The bond, which was oversubscribed, signals that international investors have confidence in African beyond the usual commodity growth story.”
The US$400 million bond, which is payable beginning May 2023, carries a coupon (interest rate) of 6.625 per cent. The oversubscribed order book developed momentum over the course of Wednesday to hit $3billion, and later closed at over US$3.5 billion with 250 investors participating, officials announced.
Previously, the yield (interest return) had been set at 7%, but massive enthusiasm from investors settled it at 6.625%.
Government engaged US banking giant CitiGroup and France’s BNP Paribus to work on the bond issuance. The bonds were distributed to investors globally, including in the US, Europe and Asia. Rwandan officials met key emerging market fixed income investors in Boston, Frankfurt, Hong Kong, London, Los Angeles, Munich, New York and Singapore.
Ratings from agencies had given the bond minimal backing. But a roadshow launched last week allowed Rwandan officials from the finance ministry, central bank and Rwanda Development Board to convince investors that the only place to put their money was Kigali.
Fitch Ratings however gave the bond a clean bill of health affirming that as a result of political and economic stability ushered in by President Paul Kagame in the past decade, investors had nothing to worry about as their money would be in the right hands. Economic policies set in motion by planners with IMF backing have allowed the country to live tough but within its means.
“Rwanda’s intentions are to invest in infrastructure as part of building a modern, dynamic, service-based economy that is connected to international markets and that allows for rapid development,” said minister Gatete.
A large portion of the bond proceeds will be used to complete the construction of Kigali Convention Centre. It will also help finance the 28 megawatt Nyabarongo hydro power project, which will allow Rwanda to switch off diesel generators currently in use and reduce the country’s import bill.
The issuance of the bond reflects Rwanda’s push to become less dependent on international aid, say officials in Kigali.
Having grown consistently at an average of 8.2 per cent over the past five years, the government’s ambition is to become a middle-income country by 2020.