Fitch confirms Rwanda’s economic outlook as stable

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A farmer plucks tea leaves, one of Rwanda's biggest exports. / Timothy Kisambira

Fitch Ratings, a global leader in credit ratings and research, has again affirmed Rwanda’s economic outlook as stable.

It affirmed Rwanda’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at ‘B+’ with stable outlooks, implying the confidence in the management of the economy in the short and medium term.

In the report, Fitch Ratings noted that there was low public debt and high growth potential even as the depressed commodity prices in 2016 have had increased the balance of payments pressures for Rwanda.

It noted that the Government has since moved in to narrow the trade deficit, which had widened last year largely due to the performance of prices of export products such as coffee, tea, minerals and metal ore.

The stabilisation of some commodity prices in the second half of 2016 and some early signs of success in the government’s import compression measures have resulted in a narrower deficit, the rating firm observed.

The report predicted that the continued intervention by the government to support export diversification would lead to narrowing of the account deficit.

“Fitch expects the government’s initiative to support export diversification up the value-chain and the import substitution strategy to lead to a narrowing of the current account deficit in 2017-18 to 11.1 per cent of GDP,” it said.

“A faster recovery in oil prices could add to the external pressures, while a faster than expected recovery of non-oil commodity prices or delays in the planned construction of the Bugesera International Airport would support the external adjustment,” the Fitch report reads in part.

On economic growth, the firm forecast that the economic growth trends would pick up again this year after a relatively slow performance of 5.9 per cent largely due to drought.

“Fitch forecasts growth to pick up slightly to 6.2 per cent in 2017 and 6.6 per cent in 2018 as the construction of the Bugesera airport commences and the impact of the drought on agriculture fades,” it added.

Much is premised on the rating agency’s assumptions that Rwanda will continue to implement structural reforms and prudent economic policies with support from the IMF, and that broad social and political stability will be maintained.

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