KIGALI - The International credit rating agency, Fitch Ratings, has upgraded Rwanda’s ranking from B- to B, after the country registered a strong economic growth and an improvement in its business environment.
Fitch, which provides the world’s credit markets with independent and prospective credit opinions, research, and data, lifted Rwanda’s credit rating by one step, indicating that the country is now less risky on the credit market.
Finance Minister, John Rwangombwa, said the improved rating will reduce Rwanda’s cost of borrowing.
“We have been ranked “B-“for the last three years; moving to B shows that we are improving. It shows that we are more creditworthy as a country,” Rwangombwa said, yesterday.
“It will benefit not only government, but also help the business community – it gives them a better chance (to access credit)”.
According to Fitch, the country has posted an uninterrupted period of strong economic growth that has more than doubled its income per person since the 1994 Genocide against the Tutsi.
“The upgrade to B reflects improvement in Rwanda’s business environment following an impressive structural reform drive,” said Purvi Harlalka, an Associate Director in Fitch’s sovereign group.
“Large planned investments in physical infrastructure and continued efforts to increase competitiveness will keep growth robust and support creditworthiness,” he added.
Fitch says Rwanda’s public finances also compare favourably to those of its peers as government indebtedness is low because of “extensive” debt relief earlier in the decade.
Statistics from the International Monetary Fund (IMF) indicate that Rwanda’s external debt (central government), including the one guaranteed at the end of 2009, was estimated at $749.1 million - 14.4 percent of Gross Domestic Product (GDP).
This is in comparison to 85 percent of GDP in 2000-04 which has been declining at about 15 percent of GDP since 2006.
The IMF estimates put the domestic debt at Rwf228.3 billion or 7.7 percent of GDP by the end of 2009 down from 13 percent of GDP between 2005 and 2007.
Government expects to see more improvement because it intends to sustain economic growth, maintain macroeconomic stability and fiscal discipline, Rwangombwa said.
The Minister noted that the improved rating is sustainable given the government’s planned investments in infrastructure and commitment to improving the business environment.
To move higher up the rankings, Rwangombwa said that the government will continue to put a lot of emphasis in areas such as improving the narrow export base and mobilize more domestic revenue to reduce heavy reliance on foreign aid.
Earlier this year, the IMF approved a three-year instrument for Rwanda Policy Support Instrument (PSI) on account of sustained high growth, macroeconomic stability and prudent macroeconomic policies.
The program aims to consolidate macroeconomic stability while reducing Rwanda’s aid dependency.