Moody’s assigns B2 first-time issuer ratings to Rwanda and stable outlook

Moody’s investors has assigned first-time local and foreign-currency issuer ratings of B2 to the Government of Rwanda. The outlook is stable.

According to the rating agency, the assignment was based on the following key drivers: Low economic strength balancing strong growth prospects at over 6.5 per cent over the next five years against low wealth levels, a relatively undiversified export base, and infrastructure bottlenecks that constrain competitiveness; Rwanda is among the strongest performers with respect to institutional strength in sub-Saharan Africa with a track record of sound policy implementation. Moody’s assesses the country’s institutional strength at moderate;

The other factors include, Moderate fiscal strength: although increasing, Rwanda’s debt burden will remain below the median of B-rated sovereigns of about 50 per cent of GDP over the forecast horizon. Debt servicing also remains affordable due to ample access to concessional funding sources.

Moody’s noted that susceptibility to event risk is assessed at high, primarily reflecting domestic political risk and its potential repercussions for donor support.

“It also captures increasing balance of payments risks associated with declining foreign exchange reserves and a high current account deficit, mitigated by access to the IMF’s $204 million 18-month Stand-by Credit Facility (SCF) starting June 2016,” it said.

Moody’s indicated that, concurrent with the first-time rating assignment, it has also assigned a Ba2 ceiling for local currency debt and bank deposits as well as a B1 foreign currency debt ceiling and a B3 foreign currency bank deposit ceiling.

“The local-currency country ceiling reflects the maximum credit rating achievable in local currency for a debt issuer domiciled in Rwanda (similarly for a bank deposit). The ceilings on foreign-currency bonds and bank deposits capture foreign-currency transfer and convertibility risks,” it added.

By Emmanuel K. Dogbevi