Rwanda’s economy earns Standard & Poor’s positive outlook status

Standard and Poor’s (S&P), a corporate and sovereign rating agency, has revised Rwanda’s outlook to positive from stable and maintained the rating at “B/B” for long and short-term.

The rating, by the American independent credit rating agency, was released on Friday.

 

Rating agencies such as S&P are independent institutions with international credibility and expertise to measure the credit worthiness of a country by evaluating their ability to repay with interest debts to creditors.

 

Opinions and analyses of rating agencies are important reference points used by investors and development partners for strategic decision making.

 

The analyses of such agencies is informed by a set of factors, including current debt levels, economic policies under implementation, 

The latest rating, the agency noted, was influenced by the country’s external adjustment policies whose objective is to reduce external financing needs and shore up foreign exchange.

The rating also took into account the Government’s balance of payment policies which are expected to deliver higher exports of non-traditional goods, including gemstones, textiles and agro-processing.

The 2015-2016 balance-of-payments shocks forced Rwanda to implement external adjustment policies supported by an 18-month International Monetary Fund (IMF) standby credit facility (SCF) of $204 million.

This has partly helped the current account deficit to decrease by more than half to around 7 per cent of GDP in 2017, from almost 16 per cent in 2016.

In a statement released by the S&P, the rating agency said it would look to take a positive rating action if Rwanda’s economic performance is materially stronger than its projections and compared with peers.

S&P forecast that the current account balance will gradually decline towards 2019, notwithstanding the upcoming import-heavy projects, such as construction of the proposed Bugesera airport.

It anticipates that upcoming investment projects, higher exports and consumption will support stronger medium-term growth prospects.

However, S&P long-term rating on Rwanda remains at ‘B’, reflecting low GDP per capita levels of less than $1,000 and the debt accumulation to fund infrastructure projects.

The rating reflects the assessment that the Government will keep net debt levels moderate at around 45 per cent of GDP by 2021.

editorial@newtimes.co.rw.
 

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