S&P affirms Rwanda’s 'B+/B' Ratings; Outlook Remains Negative

Posted on 06.02.2021

February 5, 2021

Standard & Poors’ Global Rating yesterday affirmed Rwanda’s long and short term sovereign rating at 'B+/B' while the outlook remained Negative

In a statement released today, S&P noted that the negative outlook indicate that Rwanda's large current account deficits could weaken the balance of payment, particularly if the COVID-19 pandemic puts a deeper strain on exports, tourism, and inward remittances.

It added that the outlook also reflects that large fiscal deficits could make financing more complicated, crowding out banks' credit to the private sector, despite the currently still favorable funding structure dominated by cheap concessional debt.

“We could lower the ratings over the next six-to twelve months if Rwanda's external position weakened further compared with our base-case forecasts. This could happen, for example, if exports, tourism inflows, or inward remittances remain below expectations,” the S&P statement reads in part.

Amid the negative economic fallout of the global pandemic, S&P expects Rwanda’s economy to gradually rebound in 2021; It projects GDP will expand by 3.9% in 2021 and by an average7.1% between 2022-2024.

The ratings agency pointed out that growth will be supported by a rebound in domestic demand aided by fiscal stimulus and gradual recovery in exports of goods and tourism flows.

“The government intends to gradually phase out the state's support package for those hit by the pandemic, which we estimate at about 5% of GDP over fiscal years 2021-2023. Support is aimed at softening the financial and economic effects of the pandemic on vulnerable households, small businesses, and hard-hit sectors, including hospitality, retail, and aviation,” S&P noted.

The Agency underscored a pipeline of public infrastructure investment, including the new Bugesera International Airport, roads, energy projects, schools, health centers, and commercial real estate should underpin strong medium-to-long-term growth prospects. Construction activity should also promote associated sectors including manufacturing activity, particularly for construction materials and metals and wholesale trade.

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