To pursue ambitious development agendas with limited fiscal space, developing economies must borrow more strategically. Rwanda’s recent financing partnership with the World Bank Group shows what this could look like. Instead of relying solely on traditional concessional loans, Rwanda has worked with the Bank to leverage policy-based concessional finance and risk-sharing instruments to unlock private capital at scale and on affordable terms.
Rwanda has forged a development path few thought possible. Over the past two decades, its annual GDP growth has averaged more than 7%, owing to prudent macroeconomic management, long-term planning, and sustained, well-executed reforms. Looking ahead, the government seeks to create 250,000 quality jobs each year, accelerate industrialization, and modernize agriculture.
Achieving these goals requires substantial long-term finance. That led the World Bank Group and Rwanda to turn conventional thinking on its head by using scarce concessional resources to catalyze private investment through a policy-based guarantee provided by the International Development Association (IDA), the World Bank’s concessional lending arm. This structure helps lower financing costs by reducing risk for investors and extending maturities.
Rwanda further strengthened this mechanism by combining the IDA first-loss guarantee with a second-loss guarantee from the World Bank’s Multilateral Investment Guarantee Agency. Taken together, these innovative instruments cover 95% of debt-service obligations on the underlying commercial loan, significantly lowering perceived risk and crowding in private lenders and reinsurers.
The result is private financing on close to concessional terms, an arrangement that preserves limited public funds. In April, Rwanda secured a €213 million ($243 million) commercial loan from Société Générale and Standard Chartered with a 15-year maturity and six-year grace period. At a time of heightened global volatility, this guarantee-backed financing package reduced borrowing costs by roughly 300 basis points compared to prevailing market conditions. Equally important, principal repayments begin only after Rwanda’s existing 2031 Eurobond matures, reducing refinancing pressures and helping improve the country’s debt profile.
This affordable capital has enabled reforms that will strengthen the Rwandan economy’s foundations and enable private-sector growth and job creation. They include measures to bolster fiscal sustainability, modernize frameworks for public-private partnerships, lower the costs of doing business, improve labor-market matching and skills development, and spur growth in sectors such as agriculture, livestock, and sustainable land management.
The first transaction may be followed by a second one to mobilize the remainder of the approved $450 million financing envelope. For Rwanda, accessing the total amount would pave the way for even more investment in infrastructure, health, education, agriculture, social protection, and industrial development—all of which would have a positive impact on people’s livelihoods and living standards.
But the significance of this pioneering approach extends beyond one country—in fact, it has now been used in Angola, Argentina, Côte d’Ivoire, and Panama, as well as Rwanda. Many developing economies are similarly grappling with limited access to capital markets, shrinking fiscal space, and lower levels of concessional financing. In such an environment, mobilizing more money requires policymakers to make better use of available resources.
Development finance must evolve from a model centered primarily on direct public lending to one that leverages public funds to reduce risk, attract private investment, and improve financing terms for countries undertaking credible reforms. This is particularly important for countries seeking to manage their liabilities and debt-service obligations more effectively, and to reduce their exposure to refinancing risks.
Rwanda’s experience shows what is possible when sound economic management and strong institutions are coupled with innovative financing. Of course, no single model will work for every country. But the underlying idea is broadly applicable: when concessional resources are used strategically—and paired with sound economic policies—they can have a significantly greater impact. To transform their economies and fulfill their development ambitions, low-income countries must embrace innovative financing solutions that can do more with less.
Yusuf Murangwa is Minister of Finance and Economic Planning of Rwanda. Junaid Kamal Ahmad is Vice President of Operations at the Multilateral Investment Guarantee Agency. Ndiamé Diop is Vice President for Eastern and Southern Africa at the World Bank.
Copyright: Project Syndicate, 2026.
