Fitch Ratings Affirms Rwanda at ‘B+’; Outlook Stable

{On Friday 27th May Fitch Ratings affirmed Rwanda’s rating at ‘B+’ with Stable Outlook. }

The key rating drivers cited by Fitch ratings balance the economy’s high growth, low inflation relative to regional peers, strong governance indicators relative to peers, and strong fiscal policy reform momentum, against low income per capita, high structural current account deficit, and continued reliance on donor flows and concessional financing.

Fitch Ratings noted that Rwanda is facing rising balance of payments pressures due to depressed commodity prices that have adversely affected the value of its metal minerals exports. The current account deficit widened to 13.5% of GDP in 2015, from 12.0% in 2014, exacerbated by a rise in construction imports, due to ongoing investments in the country. But the deficit is forecast to narrow slightly, and to improve to 11.7% in 2017 due to monetary and fiscal policy tightening and as import substitution measures take effect.

It also projected that donor grants will decrease from 33% of total revenues in FY12/13 to 21% in FY18 as Rwanda is implementing structural reforms to its fiscal framework to alleviate dependence on donor grants which are being phased out and converted into concessionary loans over the coming years. Continued improvement on fiscal reforms, such as efforts to widen the tax base is considered as one of the factors that could trigger a positive rating action.

Fitch assumes Rwanda will continue to implement structural reforms and prudent economic policies with support from the IMF. Fitch assumes that broad social and political stability will be maintained in the lead-up to and during the 2017 elections.