Rwanda’s improved fiscal performance and robust economic growth has eased its vulnerability to fiscal and debt risks, according to Standard and Poor’s (S&P) latest assessment. The credit rating firm noted that whereas, balance of payment remains high, debt servicing costs are significantly below due to access to cheap, concessional external funding.
S&P reported that while there are signs of lessening, Rwanda’s inflation remains high. This, it pointed out, could hinder the country’s transition to a more-substantial economic recovery.
Nevertheless, S&P revised Rwanda’s growth prospects to stable from negative, reflecting the country’s ease of fiscal pressures and low debt servicing costs. It also affirmed Rwanda’s long- and short-term sovereign credit ratings on Rwanda at ‘B+/B’.
The stable outlook, the credit rating firm underscores, balances the risks posed by high inflation, global headwinds, and regional tensions, against the reduction in fiscal and external risks due to favorable domestic growth, improving public debt metrics, and continued access to low-cost, concessional financing.
The report warns that the rating may be lowered in the next 12 months if Government debt rises significantly above current expectations and available concessional financing is insufficient to cover it. The rating could also sink if regional tensions escalate to a level that would hinder growth and weaken fiscal and external metrics.
S&P also indicates that rating may be raised if fiscal and external debt metrics improve significantly more than expected, underpinned by robust and sustainable economic growth combined with lower inflation. (End)