Rwanda Climate Finance Partnership Powers Innovative Climate Action
IMF News, December 3, 2023
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- Published: December 3, 2023
Partnership overview
- The Rwanda Climate Finance Partnership was launched at the Paris Summit for a New Global Financing Pact and was formally announced on the sidelines of the COP28 UN Climate Change Conference in Dubai, UAE.
- The partnership is supported by Agence Française de Développement (AFD), the European Union and Team Europe, the European Investment Bank (EIB), the International Finance Corporation (IFC), German Cooperation via KfW Development Bank, and the Italian Cooperation system with the support of Cassa Depositi e Prestiti (CDP).
- The partnership complements existing initiatives including the Rwandan-German Climate and Development Partnership and ongoing initiatives with the World Bank.
IMF support and RSF linkage
- The partnership has been made possible by Rwanda’s Resilience and Sustainability Facility (RSF) arrangement with the International Monetary Fund.
- It is expected that the IMF will disburse an additional USD 48.5 million in budget support following the approval of Rwanda’s second review of the RSF arrangement by the IMF Executive Board in mid-December.
- The Government of Rwanda announced two additional RSF-supported reform measures:
- (i) enhanced risk analysis of State-Owned Enterprises and Public-Private Partnerships that are vulnerable to climate change,
- (ii) adopting a green taxonomy adapted to Rwanda’s NDC climate action plan.
Partnership milestones announced at COP28
- Government of Rwanda (Ministry of Finance and Economic Planning) will contribute USD 40 million to support Ireme Invest, the country’s private sector green investment facility.
- EIB and the Development Bank of Rwanda have signed a EUR 20 million loan and a technical assistance agreement to support Rwanda’s green transition through Ireme Invest; the loan is the first tranche of an expected EUR 100 million financing package announced at the Paris Summit.
- The technical assistance will be provided under the EIB Greening Financial Systems programme, supporting the NDC Partnership and backed by the International Climate Initiative Fund and German Federal Ministry of Economic Affairs and Climate Action.
- At COP28 the EIB is also outlining a new EUR 100 million agricultural climate finance partnership with Bank of Kigali to support smallholders and agri-business across Rwanda impacted by climate change.
- AFD and Rwanda Development Bank have signed a EUR 20 million credit facility and a EUR 1 million technical assistance grant to scale up Ireme Invest; the first investments under the facility have already been undertaken in several sectors: green buildings and renewable energy.
- AFD has also signed a budget support of EUR 50 million and EUR 3 million technical assistance grant, announced at the Paris Summit, to advance green public financial management in Rwanda.
- AFD signed a memorandum of understanding with Bank of Kigali to strengthen cooperation in climate finance and work on a climate line of credit of EUR 20 million with a technical assistance grant of EUR 1 million.
- The Danish International Development Agency and the Rwanda Green Fund have signed a grant agreement of USD 5.27 million to support the Project Preparation Facility of Ireme Invest, which is powered by the Rwanda Green Fund.
- CDP (Cassa Depositi e Prestiti) is advancing its partnership with the Government of Rwanda to provide financial support to green transition, as part of a strategy to scale up financial flows towards sustainable development and to counter climate change in Africa.
Complementary programs and initiatives
- Programmatic approach for Rwanda’s NDC investments:
- Three programmatic investment plans under preparation on: (i) Climate-Smart Agriculture (CSA), (ii) Sustainable Urbanization, with lead support of German Technical Cooperation (GIZ), and (iii) Sustainable Landscape Management (SLM), with support from the World Bank.
- IFC will support the Government of Rwanda through the Rwanda Green Fund to develop long-term investment plans for climate smart agriculture and sustainable urbanization, focusing on increasing the role of the private sector.
- Green Taxonomy:
- Government of Rwanda announced the first phase of its green taxonomy to catalyze private financing to green projects; the initiative is supported by Germany through GIZ and is strongly interlinked with Ireme Invest and the Boosting Green Finance, Investment and Trade (GreenFIT) partnership with the World Bank.
- Rwanda’s NDC Facility (Intego):
- Intego was capitalized by Germany through KfW with seed funding of EUR 46 million as part of the EUR 222 million Rwandan-German Climate and Development Partnership.
- The first call for proposals indicates financing needs and project concepts go far beyond the seed funding; the Government of Rwanda is inviting development partners to join the initiative.
- Boosting Green Finance, Investment and Trade (GreenFIT):
- The World Bank partnered with the Government of Rwanda on a development policy operation (DPO) valued at USD 250 million over two years to increase private sector participation and improve resource mobilisation for climate resilience.
- Germany through KfW Development Bank contributed technical assistance for the DPO’s design and implementation and is considering a financial contribution for the second year of the DPO.
- European Union / Global Gateway:
- The EU is providing budget support of EUR 59 million in grants, including EUR 6.5 million technical assistance, in support of Rwanda’s NDC targets with a specific focus on adaptation in agriculture, in addition to backing the EUR 20 million EIB financing to the Rwanda Development Bank and the Bank of Kigali EIB loan.
- Development Bank of Rwanda sustainability-linked bond:
- The Development Bank of Rwanda closed a RWF 30 billion (USD 24.8 million) sustainability-linked bond issuance, partially credit-enhanced via a World Bank lending operation, representing the first such issuance by a national development bank in the world.
Strategic implications and objectives
- The Rwanda Climate Finance Partnership is a key pillar to fund Rwanda’s ambitious NDC Climate Action Plan and to scale up climate finance through public-private partnerships.
- The partnership demonstrates a shift toward significant long-term investments that leverage existing mechanisms to facilitate public-private partnerships and attract private sector investments.
- The combination of concessional finance, credit facilities, technical assistance, and policy reforms aims to:
- Mobilize private financing for green projects via Ireme Invest and the green taxonomy.
- Strengthen green public financial management through budget support and technical assistance.
- Develop a pipeline of adaptation and mitigation projects through Intego and programmatic investment plans.
Source: IMF press release "Rwanda Climate Finance Partnership Powers Innovative Climate Action", December 3, 2023.