Fitch Ratings has assigned Rwanda's forthcoming USD bond issue an expected 'B(EXP)' rating.
The rating is in line with Rwanda's 'B' Long-term foreign currency Issuer Default Rating, on which the Outlook is Stable.
Fitch affirmed Rwanda's ratings on 20 August 2012.
KEY RATING DRIVERS
Rwanda's rating is supported by solid economic policies and a track record of structural reforms, macroeconomic stability and low government debt (23.3% of GDP in 2012). The rating is constrained by structural weaknesses including low GDP per capita (USD644 in 2012 versus USD3,345 for the 'B' rated countries median), limited economic diversification and dependence on international donors (38% of budget receipts in fiscal year 2012/13).
RATING SENSITIVITIES
Lower reliance on international aid, improved economic diversification, and a stronger export base that enabled a fall in the current account deficit would be rating positive.
President Kagame's lengthy rule and the stability it has brought highlight the importance of an orderly succession after 2017. Any threat to political stability would be rating negative.
KEY ASSUMPTIONS
Despite some delays in aid disbursements in fiscal year 2012/13, Fitch's central scenario is that Rwanda will continue to attract significant budget support flows, reflecting its strong track record in poverty reduction and control of corruption.
Fitch expects real GDP growth to remain robust in the medium term, in line with past performance between 7% and 8% per annum, primarily supported by investment and external demand for minerals, tea, coffee and tourism.
Fitch forecasts the budget deficit will narrow to 2.3% of GDP by fiscal year 2014/15 from 5.9% in fiscal year 2012/13. This reflects both lower public expenditure on account of improved prioritisation of spending and the increase in tax revenue owing to GDP growth and on-going reforms to increase the tax take.
Source: Fitch Ratings.
