The Lower House on June 7, approved a law ratifying a €200m (approx. Rwf280 billion) loan agreement that Rwanda signed with JPMorgan Chase's London branch, to support the country's sustainable financing framework for green and social projects.
JPMorgan Chase is the largest bank in the United States of America.
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Here are three things to know about the deal:
African Development Fund as the partial loan guarantor
Richard Tusabe, the Minister of State in charge of the National Treasury at the Ministry of Finance and Economic Planning, said that one of the government's medium-term strategies is to look for means to back Rwanda's efforts to be resilient to climate change.
It is in that context that Rwanda mobilised funding under a new form of long-term commercial loan that is provided by JPMorgan Chase Bank and partly guaranteed by the African Development Fund (ADF) in line with contributing to a sustainable financing framework in Rwanda, he observed.
Of that funding, he said, €180 million is guaranteed by ADF, while the remaining €20 million is not.
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Interest rate, and repayment period
The €180 million of the loan covered by security from ADF will be repaid within 10 years that are counted after five years [of grace period], at 1.3 per cent interest rate per year plus an interest rate charged among European banks in a period of six months, Tusabe pointed out.
He added that the €20 million that does not have the ADF security will be paid back in a three-year period that will be counted after two years [of grace period] at an interest rate of 5.25 per cent per year, plus an interest rate charged among European banks for six months.
Implication
Tusabe told lawmakers that the government developed a sustainable financing framework by the government to mobile enough finance to invest in environmental conservation activities to contribute to Rwanda's vision to be a country with a green economy capable of withstanding climate change shocks by 2050, as well as supporting welfare improvement schemes.
The funds were mobilised to endorse the programme and will play a role in the implementation of the national programme to deal with climate change and promote the environment.
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"Eligible projects to be funded which will consist of activities in line with the promotion of environment and strategies to deal with climate change, will play a remarkable role towards achieving an economy free from harmful emissions," he said, adding that the projects will also contribute to nutrition and food security, improving people's welfare.
In a statement that the African Development Bank (AfDB) issued on June 3 after ADF signed an agreement with Rwanda to partly guarantee the loan, AfDB Vice President Solomon Quaynor said "we are delighted to continue our partnership with the Government of Rwanda in its efforts to promote green and inclusive growth in line with its Vision 2050.
This guarantee from the African Development Fund will enable Rwanda's inaugural access to financing under its Sustainable Finance Framework at competitive terms."
