Rwanda: Rating Agency Reaffirms Rwanda's Creditworthiness

12 February 2020

Standard & Poor's (S&P), an international financial services company, has maintained Rwanda's rating at "B+" thereby boosting investor confidence in the country.

The international credit rating agency observed that the ratings on Rwanda are supported by above-average growth trends compared with peers.

A sovereign credit rating is an independent assessment of a country's creditworthiness.

It is important because it gives investors insight into the level of risk associated with investing in the debt of a particular country, including any political risk.

This they noted is underpinned by the government's track record of delivering inclusive growth through state-financed projects and broader macroeconomic initiatives.

S&P projected continued high economic growth primarily driven by public investment, pointing out that it would likely result in higher fiscal deficits and rising government debt levels.

However, the rating agency noted that a large portion of the higher fiscal deficits will be funded through concessional sources with long maturities, keeping funding costs low.

"We have revised our 2019 real GDP growth estimate upward to 9.5 per cent, from 7.5 per cent previously, on the back of stronger outcomes during the first three quarters of 2019.

The key growth spurs included a ramp-up in construction projects and strong performance in manufacturing and services, with the latter supported by RwandAir and trade," Standard & Poor's statement read in part.

S&P forecasts real GDP growth of 7.7 per cent annually over 2020-2023, citing a strong pipeline of construction projects including roads, energy projects, stadiums, schools, health centres and private residential and commercial real estate as factors to support Rwanda's growth prospects.

The agency forecasts that construction projects is likely to boost manufacturing activity, particularly for construction materials and metals.

The agency's assumptions are that growth in agriculture and related industries will be supported by investment to boost the sector's resilience to adverse weather-related shocks, as well as a focus on increasing the value-added from the sector through agro-processing, washed coffee, specialty teas, and horticulture exports.

"Government efforts to formalize the mining sector should, in the medium term, increase productivity and processing of traditional minerals (tin, tungsten, and tantalum) and nontraditional minerals, such as gemstones," S&P added.

In August last year, S&P Global Ratings revised the country’s assessment to ‘B+’ from ‘B’.

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