Rwanda - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

The updated Bank-Fund debt sustainability analysis (DSA) for Rwanda indicates a moderate external and overall public debt distress risk. The current debt-carrying capacity is consistent with a classification of ‘strong’. The baseline scenario is based on the macroeconomic projections presented in the accompanying staff report for the fourth PCI/RSF review and the second SCF review. Rwanda’s financing strategy assumes continued support from official development partners over the medium term, with highly concessional loans for new external borrowing under IDA20 and an increasing share of domestic financing in the long term. Debt indicators and standard stress tests classify debt sustainability risks as moderate with limited space to absorb shocks, with near-term breaches of the benchmark for PV of public debt to GDP and the threshold for PV external debt-to-GDP highlighting vulnerability to external and climate shocks. Heightened uncertainty around key external risks to concessional financing over the medium term, baseline risks to domestic resource mobilization, and sustained exchange rate pressures could intensify debt sustainability risks over the medium term. The authorities are encouraged to progress on fiscal consolidation, support external adjustment with accurate and effective exchange rate adjustment, and implement RSF reform measures to support their climate agenda.