31 October 2012

Rwanda: Maintain Prudent Fiscal Policy


American credit rating agency, Standard and Poor's (S&P), on Monday retained its 'B/B' long and short term credit rating on Rwanda, reflecting the country's firm ability to raise funding in the international debt market.

The rating comes at a time some development partners have delayed their donor assistance to Rwanda, partly, over allegations by the UN team of experts that the country is supporting the M23 rebels operating in Eastern DR Congo.

As a result, S&P revised its outlook on Rwanda to stable from positive, suggesting that delays in aid disbursement will be short term and that the government will take offsetting measures to ensure that the impact on fiscal performance is limited.

Such sovereign credit rating is aimed at assessing the country's credit worthiness in the eyes of international investors. It measures the risk of investing in countries - political as well as economic risk.

Based on S&P's rating on Rwanda, the country shouldn't have problems raising funds in the international bond market, in case it decides to.

The agency was cautious not to upgrade Rwanda's sovereign rating, though, citing the country's weakening in its external environment.

Yet, the ratings were premised on the country's robust economic growth performance, decisive market-oriented reforms, and good macroeconomic management.

The country has managed to endure global economic shocks and regional crisis thanks to a sound macroeconomic policy management.

As the central bank keep its monetary policy moderately tight, government should also continue to balance its borrowing and expenditure while pursuing measures to reduce the prevailing fiscal deficit.

In order to achieve the targeted growth rate, government needs to maintain the same course of investment in infrastructure to attract private investments.

S&P said it could raise the ratings if it sees that Rwanda's reform momentum translates to a tangible broadening in its growth and export base, and if the monetary policy framework is strengthened while safeguarding macroeconomic and financial sector stability.

Copyright © 2012 The New Times. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.