Kagame’s Prestige Projects Are Deepening Debt Past 80% of GDP, Reversing Donor Relief that Reduced Rwanda’s Indebtedness from 119.5% to 19.5% of GDP

By David Himbara

Under the Heavily Indebted Poor Countries (HIPC) Initiative, the larger part of Rwanda’s external was written off between 2000 and 2008. By 2008, donors had struck off US$1.4 Billion from Rwanda’s debt leaving US$688.9 Million. This meant Rwanda’s debt which stood at 119.5% of GDP in 1995, dropped to 19.5% in 2008. Fast forward to 2022, Rwanda’s debt will increase to over 80% of GDP. Rwanda is headed back to where it was before the debt relief due to General Paul Kagame’s prestigious projects with low return on investment.

General Paul Kagame aboard one of his mega projects, RwandAir

Central government foreign debt, domestic debt, and the debt of state-owned enterprises are an albatross around Rwanda’s neck. There can be no question that Rwanda is in deep trouble over debt. According to the data of Rwanda’s Ministry of Finance and Economic Planning, in 2010, the central government external debt was US$777.3 million. By 2020, the external debt had climbed to US$5.2 billion. Domestic debt rose from US$368.2 million in 2010 to US$1.3 billion in 2020. Meanwhile, the debt of state-owned enterprises (SOEs) rose from US$23 million in 2010 to US$514 million in 2020.

This means that Rwanda owes foreign and domestic creditors over US$7 billion. The International Monetary Fund (IMF) calculates that Rwanda’s debt will increase to over 80 percent of GDP in 2022 from 71.3 percent in 2020. The IMF concludes that Rwanda’s debt “risks have heightened and buffers to cushion the impact of external shocks have diminished.”

How did Rwanda accumulate so much after debt relief that dropped the indebtedness from 119,5% to 19.5% GDP?

Rwanda got into this mess firstly by the Kagame regime’s failure to develop the private sector. Kagame’s development model is state-led. Even Rwanda’s private sector is dominated by the ruling party’s business empire, Crystal Ventures Ltd, which has a privileged relationship with the state. Leading Rwandan business persons quit Rwanda or saw their properties seized by the regime. Secondly, Rwanda’s debts shot up from 2014 onwards with the delusion of turning Rwanda into a conference tourism hub. That thinking led to the building of the Kigali Convention Centre, the expansion of RwandAir and the construction of Kigali Arena. The bulk of the SOEs’ debt which rose from US$23 million in 2010 to US$514 million in 2020 was virtually spent on keeping afloat the otherwise bankrupt RwandAir. Who will contain Kagame and save Rwanda from his delusions of grandeur?