Agusto & Co. assigned a “B+” rating to the Republic of Rwanda with a stable outlook.

Agusto & Co. assigned a “B+” rating to the Republic of Rwanda with a stable outlook.

Rating Release

Agusto & Co. assigned a “B+” rating to the Republic of Rwanda with a stable outlook.

The rating affirmation reflects our opinion on Rwanda’s resilient economy, which has achieved an average real GDP growth of circa 7% over the past two decades. Rwanda’s public debt also remains well-managed, with a moderate risk of distress and a debt service to revenue ratio below the IMF threshold of 30%. Additionally, Rwanda’s political stability, alongside key socioeconomic and structural reforms, continue to drive national unity and accelerate economic development. However, the rating is tempered by an elevated inflation rate (14.3%) above the regulatory threshold and a substantial depreciation (18.1%) of the Rwandan Franc in the financial year ended 31 December 2023 (FY 2023).

Agusto & Co. projects Rwanda’s real GDP to grow by 9% in FY 2024 and 9.5% in FY 2025, with the services sector, led by tourism and information and communication technology subsectors, driving growth and contributing an estimated 12%. The industrial sector is projected to follow closely with a 9% contribution, supported by a rebound in construction and manufacturing activities. Recovery of the agricultural sector is also expected to boost economic growth due to improved output from Season A of the agricultural cycle. Furthermore, the Rwandan government’s strong commitment to promoting investments in key sectors such as tourism, renewable energy, and infrastructure has enhanced the country’s appeal as a prime destination for investment and business opportunities, thereby fuelling economic growth. Rwanda’s economic prospects are further enhanced by its political stability and a series of socioeconomic and structural reforms that are designed to enhance national unity and accelerate development.

We anticipate a gradual decline in the inflation rate to 5% in 2024, primarily driven by easing food prices as domestic agricultural production normalizes. This decline will also be supported by tight monetary policies, easing international commodity prices, and subdued global demand. In the short to medium term, persistent global and domestic challenges are likely to continue exerting depreciating pressure on the Rwandan Franc. However, we expect foreign exchange reserves to remain sufficient, providing coverage for at least four months of imports. We anticipate Rwanda’s debt to remain within sustainable bounds, with a target of maintaining the debt-to-GDP ratio below 65% by FY 2031. This objective will be realized through a fiscal consolidation strategy, emphasizing spending rationalization, an efficient domestic revenue mobilization approach, and enhanced fiscal risk management.

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