Standard & Poor’s (S&P) has maintained Rwanda’s rating at “B+” but observed that the outlook remained negative.
A sovereign credit rating is an independent assessment of a country’s creditworthiness.
It serves to give investors insight into the level of risk associated with investing in the debt of a particular country, including any political risk.
The international credit rating agency observed that amid the negative economic fallout of the global pandemic, Rwanda’s economy will gradually rebound in 2021; It projects GDP will expand by 3.9 per cent in 2021 and by an average 7.1 per cent between 2022-2024.
The rating explained that the negative outlook indicates 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.
The rating also noted 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 favorable funding structure dominated by cheap concessional debt.
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 per cent 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,” the ranking noted.
A pipeline of public infrastructure investment, including the new International Airport in Bugesera, 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.
Source: The New Times