Standard & Poor\u2019s (S&P) has given Rwanda a B+\/B credit rating on account of the country\u2019s current political and economic stability and in the foreseeable future. <\/p>\n
The positive rating, by the American independent credit rating agency, is the latest by the firm.<\/p>\n
\u201cOur current B+ rating and stable outlook incorporate our belief that the 2017 transition will be managed smoothly and will not weaken the country\u2019s institutional framework or result in civil unrest,\u201d the agency said in a statement.<\/p>\n
{{Rwanda is scheduled to have presidential elections in 2017.}}<\/p>\n
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, to avoid the likelihood of defaulting.<\/p>\n
Opinions and analyses of rating agencies are important reference points used by investors and development partners for strategic decision making.<\/p>\n
S&P\u2019s latest verdict on Rwanda is seen as an endorsement of the central bank\u2019s macroeconomic management policies on which the economy is running.<\/p>\n
Central bank governor John Rwangombwa said \u201cthe rating is an independent verdict on how our country and, more so, the economy is well-managed; it gives confidence to investors to invest with us.\u201d<\/p>\n
{{Manageable debt}}<\/p>\n
The primary signal of a positive credit rating such as B+ is that a country\u2019s economy is robust enough and capable to meet its debt obligations by paying creditors in time with minimal risk of defaulting.<\/p>\n
Rwanda\u2019s ability to service its external debts got a strong nod from S&P\u2019s analysts who noted that at just 30 per cent of the country\u2019s total GDP, well below the international threshold of 50 per cent, the country\u2019s external debt is low and manageable.<\/p>\n
With such a favourable ruling, Rwanda could choose to raise money from the international market to fund its budget but Finance and Economic Planning minister Claver Gatete said the government will not squander its room for more debt just for the sake of it.<\/p>\n
\u201cCurrently, we are listed as a low debt country, which means we have more room to borrow but we have to use that room carefully. We don\u2019t intend to squander it,\u201d Gatete said.<\/p>\n
He said government will surely return to the market but only at a time it deems right and with a clear reason for borrowing; in other words, prudent borrowing and spending will shape the country\u2019s relationship with the market.<\/p>\n
Rwanda\u2019s total public debt stock in 2013 was slightly more than $2 billion (equivalent to 27.4 per cent of GDP), the majority of which were classified as concessional loans.<\/p>\n
Concessional loans are generally favourable because they have longer grace periods and, in most cases, they carry interest rates that are lower than market rates at the time of borrowing.<\/p>\n
In April 2013, Rwanda\u2019 debut on the international market was received with overwhelming response from investors after the successful issuance of a $400 million Eurobond.<\/p>\n
The bond, whose maturity date is 2023, was over-subscribed, thus boosting confidence in Rwanda\u2019s creditworthiness, and, investors who couldn\u2019t get their hands on it have since been eagerly waiting for a return but that might take a little longer, Gatete said.<\/p>\n
According to international market experts, bond investors must be convinced of the creditworthiness of a country in comparison with other sovereign nations before they make a move; Rwanda clearly has the right credentials.<\/p>\n
{{Strong growth}}<\/p>\n
In 2014, S&P had projected Rwanda\u2019s economic growth to grow at 6.3 per cent in 2014 but the economy did better posting a 7 per cent expansion to announce a recovery from the 4.6 per rcent contraction the previous year.<\/p>\n
The rating agency now says it expects growth to keep up the pace between 2015 and 2018 on account of sustained public sector capital projects, public and private sector investments in services, ICT and energy.<\/p>\n
Minister Gatete said S&P\u2019s reading of the Rwandan economy is generally in line with the government\u2019s own reading of the situation and that the projected stable growth should be a strong incentive for foreign investors to come and invest in the country.<\/p>\n
\u201cWhat S&P is saying is that our economy is stable and secure. This reassures investors who want to do business in Rwanda that there\u2019s nothing to fear,\u201d Gatete said.<\/p>\n
A slight concern is Rwanda\u2019s state of current account, which S&P says weakened to 11.8 per cent in 2014, higher than the 10 per cent the firm had projected.<\/p>\n
A country\u2019s current account refers to the net income received from abroad while \u2018current transfers\u2019 means what a country pays out; at 11.8 per cent deficit, it means Rwanda is taking out more from its account than what it is earning; unfavourable one-sided transactions.<\/p>\n
However, S&P projects that Rwanda\u2019s current account deficit will ease from the current 11.8 per cent to an average of 9.8 per cent between 2015 and 2018.<\/p>\n
Part of the reason for Rwanda\u2019s current account deficit, according to S&P, is the government\u2019s shift from multi-lateral grant funding amounting to some $150 million or 1.8 per cent of GDP to loans.<\/p>\n
The NewTimes<\/p>\n","protected":false},"excerpt":{"rendered":"
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