Rwanda - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

The updated debt sustainability analysis (DSA) continues to indicate a moderate risk of external and overall public debt distress, with limited space to absorb shocks. The debt-carrying capacity classification remains ‘strong’. Rwanda’s financing strategy assumes continued support from official development partners over the medium term, highly concessional loans for new external borrowing under IDA20 and IDA21, and an increasing share of domestic financing in the long term. Compared to the December 2025 DSA, revised baseline assumptions incorporate tighter external financing conditions, lower-than projected ODA flows, and IMF financing under the 38-month ECF-arrangement requested by the authorities. Debt indicators classify debt sustainability risks as moderate with limited space to absorb shocks, with near-term standard stress test breaches of the benchmark for PV public debt-to-GDP and the threshold for PV external debt-to-GDP highlighting vulnerability to external and climate shocks. Baseline external debt service-to-revenue rises over the medium-term, with stress test breaches highlighting mounting liquidity pressures and vulnerability to external financing conditions. The baseline relies on continued consolidation, underpinned by implementation of the authorities’ medium-term revenue strategy (MTRS2). Heightened uncertainty around key external risks to concessional financing over the medium-term, underperformance risks to domestic resource mobilization, and sustained exchange rate pressures could intensify debt sustainability risks. Domestic debt risks remain broadly contained, with risk indicators rising rapidly after 2030, which should be monitored closely. The authorities should advance fiscal consolidation, reprioritize investment projects to mitigate external financing needs, and support the external adjustment with real effective exchange rate adjustment, those objectives are incorporated into the ECF program.