Dr. Claudine Uwera(2nd L), the Minister of State in Charge of Economic Planning explaining the draft law
The Rwanda Parliament has approved $100 million loan for the Economic Recovery Fund (ERF) to support the recovery of businesses hard hit by the COVID-19 pandemic.
The fund is specifically meant for technical support for institutional capacity and sustainability in the post pandemic era.
The financing from the International Development Association (IDA) comes after the funding of around $ 250 million from World Bank and Asian Infrastructure Investment Bank (AIIB) credit for the ERF fund which the Government established in April 2020 to provide a framework for the response to the COVID-19.
The objective of the Fund was to support businesses so that they can survive, resume operations, and safeguard employment, thereby cushioning the economic effects of the pandemic.
The draft law approving the ratification of the loan agreement signed June 4, 2023 in Kigali was today approved following explanations from the government representative, Dr. Claudine Uwera, the Minister of State in Charge of Economic Planning.
The Minister stated that the fund will address the growing demand for financing from private businesses to enable long long term investments in priority and high-growth sectors, and to cover their operating expenses and working capital needs.
Uwera noted that the present funding has a special aspect of institutional support and stability.
“It is a well thought of funding project and considers the sustainability of its impact. Reports on this funding show that this project succeeded and returns on profit and demand was also high. That is why we see this as a very important funding,” Uwera said.
The credit will be reimbursed at an interest rate of 0.75% over a period of six (6) years, after a grace period of six (6) years.
The Project consists three parts, including liquidity and recovery facility which focuses on addressing firms’ short- and long-term financial needs to help them withstand the crisis, grow their business and build resilience, specifically strengthening climate resilience.
The project provides lines of credit to Financial Institutions for on-lending to highly impacted and/or strategically important sectors and firms to support economic recovery and business continuity.
The risk sharing facility supports enhancing and scaling up the existing Partial Credit Guarantee scheme in the local Business Development Fund – BDF, and the development of two new de-risking schemes to provide liquidity and insurance instruments in support of Micro, Small, and Medium Enterprises in the event of climatic shocks.
The institutional strengthening and implementation support focuses on three key areas to strengthen capacity at various levels, to support project implementation: technical assistance to project beneficiaries; technical assistance and capacity building for implementing agencies, and project management and monitoring.
Finally, the Contingency Emergency Response is a component that will provide immediate response to an eligible emergency, as needed.
