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.
Such analyses of the rating agencies are important reference points used by investors and development partners for strategic decision making.
S&P’s latest rating ofRwanda said that it would take a positive rating action if Rwanda’s economic performance was materially stronger than its projections and compared with peers.
The 2015-2016 balance-of-payments shocks forced Rwanda to implemented 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% of GDP in 2017, from almost 16% in 2016.
S&P projected that the current account balance will gradually decline from 2019, notwithstanding the upcoming import-heavy projects, such as construction of the new Bugesera airport. It further anticipated that upcoming investment projects, higher exports and consumption will support stronger medium-term growth prospects.
However, S&P long-term rating on Rwanda was unchanged and remained at ‘B’, reflecting low GDP per capita levels of less than $1,000 and the debt accumulation to fund infrastructure projects. The rating reflects their assessment that the government will keep net debt levels moderate at around 45% of GDP by 2021.
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