Rwanda Faces Trouble as Congo War Brings Economic Risks

Rwanda is in danger of facing economic problems because it supports rebel fighters causing chaos in the Democratic Republic of Congo according to Bloomberg

The International Monetary Fund (IMF) and financial experts have warned that the war could cost Rwanda a lot of money. At the same time, big donors like the UK are thinking about stopping over $1 billion in aid.

More and more countries are speaking out against Rwanda for helping the M23 rebel group, which has been fighting in eastern Congo. President Paul Kagame, once respected by Western leaders for his strict leadership, is now losing support. As the war continues, Rwanda’s economy could suffer greatly.

“If this war goes on, it will cause serious problems for Rwanda, including financial struggles and less money for development,” the IMF said last week.

Rwanda’s Debt and Economy Are in Danger

• Rwanda’s debt will reach 80% of its economy this year.

• Donors may stop giving money because of Rwanda’s actions in Congo.

  
  

Rwanda’s international bonds lost value after the M23 rebels entered Goma, a city with about 2 million people. The country’s finance ministry has not explained how the war will affect its economy.

For years, Rwanda has depended on foreign aid and cheap loans to keep its government running. But now, its debt is getting worse. The IMF says Rwanda’s debt will reach 80% of its economy this year, making it a country at “moderate” risk of financial trouble.

The U.S. and the United Nations say Rwanda is helping the M23 rebels by sending its own soldiers into Congo. As these rebels take over more land, Rwanda is under pressure.

“If Rwanda loses foreign aid, it will have to borrow more money at higher interest rates,” financial experts at S&P said. They warned that the economy could slow down, the government might spend less on projects, and fewer tourists may visit Rwanda.

Rwanda depends heavily on foreign money:

• 5% of its government budget comes from aid.

• 22% of its spending is supported by foreign loans.

  
  

If donors stop their support, Rwanda will struggle even more. The country already has a large amount of debt in foreign currency, which could become even more expensive if its money loses value.

One thing that seems to be helping Rwanda’s economy is gold trading. The IMF says Rwanda’s gold exports will reach $2.3 billion by 2026, compared to $556 million in 2022. But questions remain about where this gold is coming from, as Congo is rich in minerals and Rwanda has been accused of smuggling gold out of its neighbor.

At the weekend, two regional groups demanded that Rwanda remove its soldiers from Congo. Kagame’s government has denied sending troops, but in an interview with CNN, Kagame himself seemed unsure, saying he doesn’t know if Rwandan soldiers are in Congo.

Observers say foreign countries should take stronger action to force Rwanda to stop its involvement. In 2012, when the M23 rebels last took Goma, cutting aid to Rwanda had an immediate effect.

“Rwanda is very weak when it comes to foreign aid,” said Jason Stearns, an expert on Congo. “If donors act, they can quickly pressure Rwanda to stop.”

Source Bloomberg