Rwanda set to receive €300 million from global partners

Rwandan President Paul Kagame (Internet photo).

KIGALI - Rwanda and international development banks plan to raise an extra 300 million euros ($328.86 million) to help the country adapt to a changing climate, the International Monetary Fund (IMF) said on Thursday.

Earlier this year, IMF had allowed for a disbursement of $98.6 million of an initial $319 million.

This new support would build on that and the Rwandan government's fund-raising efforts would be helped by France's Agence Française de Développement (AFD), the European Investment Bank (EIB), Italy's Cassa Depositi e Prestiti (CDP), and the International Finance Corporation (IFC).

The proceeds will help businesses in Rwanda to access green financing and develop policies aimed at tackling climate change, the IMF said.

 “The partnership we have announced represents a transformational shift in the provision of climate finance and is a vote of confidence in Rwanda’s long-term climate action strategy. This is an important milestone in our journey to achieve our Nationally Determined Contributions that are estimated at USD 11 billion by 2030. We thank all the partners that have joined this initiative and we will be working together to make it a reality.” – The Right Honourable Prime Minister of Rwanda, Dr. Edouard Ngirente.

The new support complements and builds on the USD 319 million in financing accessed by the Government of Rwanda through the Resilience and Sustainability Facility (RSF) arrangement with the International Monetary Fund (IMF).

The ground-breaking partnership, which was unveiled at the Paris Summit for a New Global Financing Pact, is part of ongoing efforts by the international community to reshape the global climate finance architecture, including by moving beyond small-scale projects to significant long-term investments that leverage existing mechanisms to facilitate public-private partnerships and attract private sector investments.

“The agreement with Rwanda illustrates how joining forces in international partnerships is the only way forward in addressing the climate crisis. The European Union and its Member States are the world’s largest provider of public climate finance, and we remain committed to a multilateral approach. Through Global Gateway and together with our allies, we strive to bridge the investment gap and support partner countries, in particular in Africa, to mitigate and adapt to climate change. Our ambition is a green transition that is fair to the most vulnerable.” – Jutta Urpilainen, European Commissioner for International Partnerships.

Werner Hoyer, President of the European Investment Bank pointed out that "The close cooperation between the Government of Rwanda, IMF, international financing partners and the EIB is harnessing the potential of Special Drawing Rights to advance climate action. The strategic use of SDRs will significantly amplify the impact of climate action investments in the country, paving the way for a greener and more prosperous future. This initiative represents the EIB’s strong commitment to combating climate change and supporting sustainable development in Rwanda and beyond."

This  collaborative support will bolster Rwanda's efforts to address the impact of climate change on vulnerable communities and strengthen the catalyzing effect of the IMF’s RSF arrangement by attracting additional budget support from partners, initiate a programmatic approach for climate investments, and scale up Ireme Invest – Rwanda’s unique and innovative investment facility dedicated to private sector green investment – that was launched by His Excellency President Paul Kagame in November 2022 at the UN Climate Change Conference (COP27) in Egypt.

Partners have also committed to support Rwanda’s capacity development initiatives, and help attract and better manage further climate capital. As part of the collaborative approach, partners have committed to consolidate and mobilise the following climate finance resources for Rwanda:

AFD is providing € 50 million programmatic budget support accompanied by a € 3 million technical assistance grant, with an initial disbursement expected in 2023.

 This financial contribution will be complementary and additional to the RSF-supported programme’s matrix of reforms, the greening of public investments and procurement as well as strengthening Rwanda’s Measurement, Reporting, and Verification (MRV) framework. The technical assistance will also support the implementation of Rwanda’s sustainable finance roadmap with a view to increase private sector mobilisation in support of climate action.

The International Finance Corporation, in partnership with the Government of Rwanda through the Rwanda Green Fund (FONERWA), will jointly develop long-term investment plans for climate smart agriculture and sustainable urbanisation to increase the role of the private sector in greening Rwanda’s economy.

The Government of Rwanda will support scaling up of access to green finance for the private sector to further enable BRD to grow its lending portfolio for the private sector at affordable interest rates.

The European Investment Bank is expected to provide € 100 million supported by the European Union. This support is provided under the Global Gateway strategy: the EU’s positive offer to deliver sustainable and trusted connections with partner countries and build more resilient societies for people and planet.

Cassa Depositi e Prestiti – the Italian Development Finance Institution – is discussing with the Government of Rwanda and BRD joint actions to scale up climate finance bridging public and private investments.

To further underpin the creation of private green assets in Rwanda, Ireme Invest private stakeholders will also directly contribute EUR 130 million equivalent in own private equity. The creation of new green private assets also opens the door for future issuances of innovative debt instruments on the local and international markets which will further crowd in private investment.

The coordinated initiative to scale up climate financing, combined with the policy reforms envisaged under the IMF’s RSF arrangement and capacity development support from the IMF will allow Rwanda to better withstand economic shocks and adapt to a changing climate.

This unique collaboration between the Government of Rwanda and international partners exemplifies the power of partnerships in tackling pressing global challenges. It sets a precedent for other nations and financial institutions to explore innovative financing mechanisms and join forces in the pursuit of a sustainable and climate-resilient world.

It also adds to the substantial financial and technical support provided by the World Bank (IDA) to support Rwanda’s efforts to enhance its climate resilience and secure its natural assets – especially in vulnerable communities – unlock private investments and promote green finance and trade, as well as financial contributions by the Governments of Germany, the United Kingdom, Sweden and Denmark towards Rwanda’s NDC climate action plan.

GAROWE ONLINE