Fitch Ratings affirms Rwanda’s credit standing as stable

Fitch Ratings affirms Rwanda’s credit standing as stable

International credit rating agency, Fitch Rating has rated Rwanda’s creditworthiness at B+ with a stable outlook.

Credit rating is an independent assessment of a country’s creditworthiness. The ratings give investors and fund managers insight into the level of risk associated with investing in the debt of a particular country, including any political risk.

In its latest release, the agency noted a stable macroeconomic performance, marked by high potential growth and relatively low inflation prior to the coronavirus shock and underpinned by strong governance and a conducive business environment.

The Covid-19 pandemic was found to have dented the economic landscape in ways such as current account deficits, growing debt and reduced income.

The agency further observed that a return to strong GDP growth consistent with stabilising debt will enable Rwanda to absorb the adverse impact of the coronavirus pandemic on its creditworthiness at the ‘B+’ level.

“The fiscal support measures in the government’s Economic Recovery Plan are estimated to have an incremental cost of over 3% of GDP in 2020-2021 and include support for vulnerable households, subsidized loans and credit guarantees for hard-hit sectors and tax leniency measures,” the author’s notes read in part.

There is set to be a difference between income of the government and total expenditure, expenditure being higher as the country puts focus on recovery. The rating projected that the gap is set to narrow commencing in 2022.

Current debt remains stable as most is concessional giving the country room to borrow more in the coming months to cover the fiscal deficit.

“We expect the government to be able to comfortably cover the fiscal deficit primarily through foreign borrowing mostly on concessional terms, as has been the case in the past. More than 80 per cent of Rwanda’s debt was owed to multilateral and bilateral creditors at end-2019, chiefly to the World Bank, and as a result government interest/revenue and maturities/GDP are much lower,” the report noted.