Fitch Upgrades Rwanda’s Rating To B+, Outlook Stable

Fitch Upgrades Rwanda’s Rating To B+, Outlook Stable

Fitch Ratings, the third largest rating agency in the world, has upgraded Rwanda’s long-term foreign and local currency Issuer Default Ratings (IDR) to ‘B+’ from the ‘B’ rating it had previously given the tiny East African nation in January.

The issue also upgrades the ratings for Rwanda’s senior unsecured foreign and local currency bonds from ‘B’ to ‘B+’.

Rwanda relies on external aid that takes care of nearly half of the national budget and the new credit rating is very significant to Rwanda’s borrowing plans as it will boost the confidence of potential lenders. Rwanda’s current spending is mostly covered by tax revenues.

This means that Rwanda’s high economic growth prospects are strong. GDP growth has averaged 6.9 percent in 2009-2014 in a stable macro environment, supported by structural reforms.

Fitch expects real GDP growth in Rwanda to be 6.5 percent and to increase to 7-8 percent in the medium term, in line with performance during the past decade.

“Growth will benefit from stronger regional integration within the East African Community and rapid gains in agriculture, mines, tourism and services,” Fitch said in a statement.

According to experts, a high or positive rating for Rwanda means that the country’s credit worthiness is high because the likelihood of defaulting on its debt obligations has reduced.

This means that the next time Rwanda returns to the international finance markets to issue a sovereign bond, the country is well positioned to push for lower interest on the loans.

In April, Rwanda issued its first $400 million Eurobond, which because of a robust economy at home, attracted a lot of the interest from foreign investors and was subsequently oversubscribed.

Read the full Reuters report here.