The latest Fitch Ratings assessment has simultaneously retained Rwanda’s Country Ceiling and its Short-term foreign currency rating at “B” the report released August 23 indicates.
This basically means that Rwanda can be trusted to pay its debts if it’s to borrow from the global money markets and it also either ascertains to lenders that their money could be going to the right country.
In August 2010, the global agency upgraded Rwanda’s rating from ‘B-’ to ‘B’, indicating that the positive change had been due to uninterrupted period of strong growth that has more than doubled Rwanda’s income per head since 1994, lifting it to above that in some of its peers.
In the 2011 ratings, however, Fitch said there was no change from last year because of several factors.
“Downward pressure on the rating would arise from any threat to political stability,” said Fitch in a statement, suggesting that Rwanda must remain stable if it is to be trusted to be able to borrow and repay debt.
“The relatively smooth post-election period, despite criticism from opponents outside Rwanda, suggests the government should be stable in coming years.
“However, President Kagame’s lengthy rule and stability it has brought highlight the importance of an orderly succession after 2017,” said Fitch Ratings.
The agency also suggests Rwanda government should look seriously at adopting certain “structural improvements, such as increased economic diversification and lower reliance on international aid to be seen before further positive rating action is possible."
However, Fitch predicts that government debt will decline further as a percentage of GDP to 18% by 2014 – down from 20 percent currently and forecasts the deficit could decline to 2.4% of GDP in 2011/12 and 0.3% in 2013/14 from an estimated 4.8% of GDP in 2010/11.
The agency states that: “After an expansionary fiscal policy in 2010/11, the 2011/12 budget plans fiscal tightening through higher tax receipts from improvements in VAT and income tax collection, and lower spending”.
It further highlighted that increasing the low tax rate of 14% of GDP is necessary to reduce reliance on international aid, which accounts for more 44% of total budget revenues.
Nevertheless, the assessment warns that: “If Rwanda’s economic prospects are to remain positive from now until 2017 and after, the country must remain stable like it has been under President Kagame’s administration.
The President has repeatedly assured the press and other critics that once his two term mandate expires in 2017, he will neither advocate for constitutional amendment nor accept any request to do so from the electorate.