Standard and Poor’s confirms Rwanda’s rating at B+ Outlook Negative

Standard and Poor’s confirms Rwanda’s rating at B+ Outlook Negative

Standard and Poor’s (S&P) published its updated rating of Rwanda.  While Rwanda’s rating is confirmed at “B+/B” on the long- and short-term foreign and local currency sovereign credit, the outlook has been revised from stable to negative, on raising balance of payments risks.

The key rating drivers cited by S&P are, on the strong side, modest general government debt levels, estimated at close to 30% of GDP as of end-2015; government’s commitment to fundamental reforms; including in terms of ease of doing business; strong economic growth; supported by strong investment performance and strengthening exports and flexible exchange-rate regime with monetary policy that successfully maintained inflation below authorities’ target of 5%.

The change in S&P’s outlook on the Republic of Rwanda from “stable” to negative is based mainly on their view of downside risks to Rwanda’s external position.

Those risks are seen as: further weakening of the mining sector where Rwanda is a price taker for international commodity prices and the changing external deficits financing structure from grants to loans, including an increase in non-concessional loans.

In S&P’s view, the increasing share of debt-financing could pose risks for Rwanda, particularly if the projects they are financing fail to deliver the anticipated increase in foreign exchange earnings.

If these risks materialized or their expectations worsened, it could trigger a lowering of the rating

Claver Gatete, the Minister of Finance and Economic Planning noted that Rwanda is a price taker of international commodity prices and as such exports performance has been affected by the lower global demand.

“It is normal that a country like ours growing fast has needs for imports – the composition of our imports where capital have been growing in volumes speaks in that sense,” said Gatete.

Our Government’s fiscal policy has been geared towards reducing unnecessary imports in the future while promoting exports diversification. Our fiscal stance will continue to ensure very prudent borrowing for export and growth-oriented projects,” he pointed out.


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