The Rwanda-IMF agreement places a ceiling of US$500 million to finance any public enterprise in Rwanda. In 2018, however, the Kagame government threw the agreement to the wind — the regime breached the agreement by US$87 million. And what was the reason for breaching the agreement? To buy more planes for Rwandair. Further, the government indicated it was going to buy even more planes for RwandAir.
To avoid further breaching of its agreements, the government requested the IMF to raise the ceiling from US$500 Million to US$800 Million. This is how Rwanda finance minister Uzziel Ndagijimana and John Rwangombwa, Governor of National Bank, explained Rwanda’s case to the IMF in their ”Letter of Intent” dated May 23, 2018:
”In the first quarter of 2018, Rwandair contracted a lease for additional aircraft for the expansion of its fleet, which breached the indicative target on the US$500 million ceiling on external debt by public enterprises US$87 million. The rationale behind fleet and route expansion is to operate deeper into Africa by adding new routes, and creating longer haul connections to Europe, America, and Asia. Although the initial plan was to acquire two aircraft next fiscal year, an opportunity arose to acquire new aircraft following the folding of a European airline company, so Rwandair management quickly engaged the lease contracts. The aircraft will only start generating debt service payments in 2019. Going forward, leases for 3 additional aircraft are likely to be signed in 2018, including to replace two aging aircraft. Hence, the government requests an increase in the indicative limit to US$800 million to accommodate these leases.”
In its Press Release NO. 18/230 titled “IMF Executive Board Completes Ninth PSI Review for Rwanda” dated June 11, 2018, the IMF noted Rwanda’s breach:
“An indicative target on contracting new external debt by public enterprises was breached due to accelerated signing of a lease by Rwandair.”
We now wait to see if the IMF will raise the ceiling of Rwanda’s borrowing for financing public enterprises to US$800 Million. One thing is clear — RwandAir is a bottomless pit which seems to have no end. Kagame might stop this sinkhole of an airline by following Ethiopia’s example. The government there is opening its state-owned Ethiopian Airlines to private domestic and foreign investment. But then again, here I am engaged in wishful thinking.