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IMF Warns Rwanda Over Airport Debt Risk
Monday April 21, 2025 4:49 PM
Rwanda's ambitious $2 billion Bugesera International Airport project, aimed at transforming the country into a regional aviation hub, is facing scrutiny as the International Monetary Fund (IMF) warns that its cost could significantly increase public debt. The airport, expected to be completed by 2026, is a joint venture between Rwanda and Qatar, with the latter holding a 60 percent stake.
The revised cost of the project has raised concerns, particularly as Rwanda's 40 percent stake translates to an $800 million financial commitment. While the exact source of Rwanda's funding remains unclear, the government is expected to rely on external borrowing, which the IMF cautions will escalate the country's debt burden. According to the IMF, public debt could surge to 86.3 percent of GDP by 2026, intensifying debt service pressures.
Despite Rwanda's efforts to boost domestic revenue through new tax measures introduced this year, the IMF has urged the government to fully implement these reforms while carefully managing fiscal spending. The Fund emphasized the need for credible fiscal consolidation, strong revenue mobilization, and prudent monetary policies to mitigate debt vulnerabilities.
Rwanda's economy has shown resilience, but macroeconomic pressures are mounting. The IMF highlighted the risks of cost overruns on large infrastructure projects, urging vigilant monitoring. The government projects the debt to GDP ratio to reach 80 percent by the end of 2025, but analysts warn it could climb higher due to recent sanctions and reduced foreign aid linked to the conflict in neighboring Democratic Republic of Congo (DRC).
Credit rating agencies Moody's and Fitch have already downgraded Rwanda's credit outlook from stable to negative, citing risks from the ongoing instability in eastern DRC. Moody's noted that the conflict poses significant challenges to Rwanda's economic stability, while Fitch pointed to the country's heavy reliance on grants and concessional loans, which account for a substantial portion of government revenue and public investment.
Fitch estimates that Rwanda's government debt will rise to 77.8 percent of GDP in 2024, up from 72.8 percent in 2023, driven by fiscal deficits and exchange rate depreciation. With 80 percent of Rwanda's debt denominated in foreign currency, fluctuations in exchange rates could further strain the country's finances. The agency expects debt levels to stabilize at around 81 percent of GDP by 2026, well above the median for countries with similar credit ratings.
The Bugesera airport is seen as a key driver of Rwanda's economic growth, but its financing has raised concerns about long term fiscal sustainability. As the government balances infrastructure development with debt management, the IMF's warnings underscore the need for careful financial planning to avoid exacerbating the country's debt burden.
With external borrowing playing a major role in Rwanda's financing strategy, the success of the airport project will depend on the government's ability to implement reforms, attract investment, and navigate economic uncertainties in the coming years.
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