The government plans to finance its debt repayments by investing borrowed money in areas that can expand the economy and generate the resources needed to service the loans when they fall due, Finance Minister Yusuf Murangwa has said.
The approach, according to Murangwa, is based on ensuring that loans, particularly those offered on concessional terms finance investments that make the economy more productive over the period before repayment begins.
"We invest in areas that we believe are very high-impact areas that will support our economy to generate resources to pay that debt when that time comes," Murangwa, the Minister of Finance and Economic Planning, said.
His explanation comes as Rwanda prepares to receive about $35.7 million under its latest programme with the International Monetary Fund (IMF).
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The disbursement is expected in December following a staff-level agreement reached on October 6 on the first review of Rwanda's 38-month Extended Credit Facility (ECF) arrangement.
The review found that Rwanda had met all measurable targets set for June 2026. The IMF programme, approved in June, provides the country with total financing of about $250 million.
But IMF financing is only part of Rwanda's broader borrowing, raising the question of how the government intends to generate the resources needed to repay its debts.
It starts with the type of loan
Murangwa said the strategy begins with the type of loans the government takes and the terms attached to them.
"I would say that the loans that we take are in two categories. And this is around close to 90 per cent of the loans that we take. One, actually 90 per cent is in one category and the other 10 per cent is maybe in the second category. Then there is a third category that we don't like," he said.
The first category is concessional borrowing, which comes with more favourable terms than commercial loans.
Concessional loans can carry very low or even zero interest rates, provide several years before repayments begin and allow the debt to be repaid over a much longer period, sometimes 30 or 40 years.
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Murangwa said those long repayment periods give the government time to invest the borrowed funds and allow the resulting economic benefits to materialise before repayment falls due.
Investing today to repay tomorrow
Education is one area where Murangwa said such borrowing can generate long-term economic returns.
"Education is one example. If you have a population that is educated, you get that kind of money, you invest in education, from primary school to secondary school to whatever. You are very sure that this population, come 20 years down the road, should be very productive to be able to pay that loan that you got at 0 per cent interest rate," he said.
The same principle applies to health, he said, with both sectors forming part of investment in human capital.
"We try to call it human capital. So, first of all, you have a population that is educated and very productive and a population that is very healthy and able to work, to actually work."
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The government's strategy, therefore, is to use borrowed resources to increase economic productivity so that, by the time repayment falls due, the economy is better positioned to generate the resources required to service the debt.
What about shorter-term loans?
Rwanda also takes semi-concessional loans, Murangwa said. These have higher interest rates and are used for high-impact projects expected to generate returns over a shorter period.
"These are resources you borrow to invest in high-impact, high-return projects that are short-term," he said.
He cited an airport as an example of the kind of investment that could be financed through such borrowing.
"Take an airport, for example. You borrow money at 2 per cent. You have a grace period of three years, five years. You build the airport in three years. Then the airport becomes very productive. You get a lot of resources that you wouldn't get without the airport."
Murangwa said the underlying principle is that the benefits generated by an investment should exceed the cost of financing it.
"The objective is, whatever you're investing in is more productive than what you're going to be paying. That should be the catch. You are investing in things that are a lot more productive than the amount of money that you'll be paying," he said.
Does repayment mean higher taxes?
Murangwa said the government does not intend to automatically raise taxes simply because the country has borrowed money or is implementing an IMF programme.
"We are very careful. We only put taxes when we think the taxes are needed, and there are programmes that we need to invest in," he said.
He added that the government considers the potential impact of taxes on those who pay them and seeks to avoid measures that could have negative implications for taxpayers.
The government already has a tax calendar extending to around 2030, he said, although measures can be reviewed as economic conditions change.
Balancing debt and development
The government's debt strategy also has to be balanced against efforts to control spending.
While Rwanda wants to continue investing in infrastructure and development, its IMF programme requires fiscal consolidation, essentially bringing government finances under tighter control.
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Murangwa acknowledged that this can create tension between reducing spending and maintaining investment.
"Under normal circumstances, in theory, there should be conflict. Because when you're consolidating on one side, you are denying resources to invest," he said.
"But in practice, we manage this. This is our job, to balance, so that we make sure that the conflict is as minimal as possible or does not exist."
He said that the balancing act is also linked to the objectives of Rwanda's second National Strategy for Transformation (NST2), which combines economic management with continued development.
"We want a good economy, a good stable economy, but also good development," Murangwa said.
Will development projects slow down?
Murangwa said Rwanda does not expect development projects to stop as a result of fiscal consolidation, although the pace of investment may be adjusted depending on economic conditions.
Projects could be slowed down or accelerated where necessary as the government balances development needs with its fiscal obligations.
The approach, he said, is to continue investing in development while ensuring that borrowing does not outpace the economy's ability to support and ultimately repay the debt.
