Global rating agency Moody’s has upgraded Rwanda’s outlook to stable from negative, citing its positive assessment that the country’s effective institutions and credible policies have preserved and will continue to anchor the government&#8217;s credit profile in response to shocks.&nbsp;&nbsp;



“Moody&#8217;s expects the government&#8217;s commitment to fiscal consolidation and revenue enhancement to keep its debt burden on a stable to declining path,” the agency said in a statement released on September 8.&nbsp;



Moody’s expects Rwanda’s economic growth to remain strong and support debt sustainability, driven by large infrastructure investments such as the construction of Bugesera International Airport and robust activity in the tourism sector that is likely to continue.&nbsp;



Rwanda’s economy has been on a recovery path. The economy grew by 9.2% year-on-year in the first quarter of 2023, following&nbsp;8.2% growth in 2022. The Composite Index of Economic Activity (CIEA), which signals where the economy is headed, grew by 6.3% in the second quarter of 2023.&nbsp;



Recovery is being driven by services and industry, which grew 13% and 9% in quarter one, respectively. In particular, transport, financial, and telecommunications services saw improved growth with air transport and telecommunications increasing 28% and 43%, respectively during the same period.&nbsp;Manufacturing and mining activities grew 16% and 15%, respectively.&nbsp;



On the other hand, the agriculture sector growth declined by 1% in Q1 2023 due to climate shocks such as floods the country has experienced, which has reduced agriculture output&nbsp;significantly&nbsp;and consequently increased food inflation in the country.&nbsp;



Moody’s, however, expressed confidence in its assessment that growing investments in infrastructure and a thriving tourism sector – tourism receipts increased 56% in the first half of 2023 to $247 million – will offset risks from climate shocks.&nbsp;&nbsp;



According to Moody’s, Rwanda’s&nbsp;effective institutions and credible policies, as demonstrated by the government&#8217;s management of successive shocks, have preserved and will continue to support fiscal and debt metrics and economic growth model, despite downside risks stemming from climate events.&nbsp;&nbsp;



As such, the credit rating agency expects the government&#8217;s fiscal deficit by the end of June 2024 to remain at similar levels to fiscal 2023, at around 6.5% of GDP, and narrowing slightly over the next few fiscal years largely consistent with the International Monetary Fund policy targets.&nbsp;



Moody’s affirms B2 rating&nbsp;&nbsp;



Moody’s also maintained its previous rating position of Rwanda’s creditworthiness, assigning the country B2, which implies that although the country has capacity to meet its financial and debt obligations, risks remain.&nbsp;



“The rating affirmation at B2 reflects Rwanda&#8217;s small and low-income economy that limits its shock absorption capacity, the government&#8217;s still high debt burden for the size of the economy and its income levels, and challenging regional geopolitics that can threaten longer-term development,&#8221; Moody&#8217;s said in a statement.&nbsp;



In Moody&#8217;s rating scale for sovereign debt, B2 falls within the &#8220;highly speculative&#8221; or &#8220;junk&#8221; category.&nbsp;&nbsp;



However, Moody’s said the credit challenges are balanced against Rwanda&#8217;s high growth potential, the country&#8217;s relatively solid institutions and governance compared to peers, and continued strong development partner support that maintains its access to external concessional financing.&nbsp;&nbsp;

Rwanda – Economy – Urban Development in Kigali

Moody’s Upgrades Rwanda’s Outlook To Stable, Economy On Recovery Path   

Africa’s largest economy has received a positive assessment from Standard and Poor&#8217;s (S&amp;P) Global Ratings, which upgraded the country’s credit outlook from negative to stable. The ratings agency cited the new government’s reform agenda as the main reason for the improved outlook.



Nigeria has received a positive assessment from Standard and Poor&#8217;s (S&amp;P) Global Ratings. The ratings agency has upgraded the credit outlook of Africa’s largest economy from negative to stable. The new government’s ambitious reform agenda has been cited as the main reason for the improved outlook, with S&amp;P keeping the sovereign rating at B-, which is six levels below investment grade.



This change in outlook comes after President Bola Tinubu, who took office in May, announced a series of bold policy moves to address some of the long-standing challenges facing the oil-rich nation. On inauguration day, Tinubu scrapped costly fuel subsidies, which have drained public finances and distorted the energy market.



He subsequently approved the suspension of the Central Bank of Nigeria (CBN) governor, Godwin Emefiele, with Folashodun Shonubi appointed as acting head. These moves have allowed for a more flexible exchange rate regime, allowing the naira to depreciate and unifying the multiple official and parallel rates that created distortions and discouraged foreign investment.



“The new government is moving ahead with a series of reforms that could, if delivered, benefit growth and fiscal outcomes,” analysts Ravi Bhatia, Samira Mensah, and Juili Pargaonkar reportedly wrote in a statement. “We believe these measures will gradually benefit Nigeria’s public finances and its balance of payments.”



Iheakanwah Felix Arinzeh,&nbsp;a financial expert and doctor of business administration, tells FORBES AFRICA: “I can deduce that the upgrade is a vote of confidence in Tinubu’s ability to deliver on his promises. Recall that Tinubu has made economic reform a top priority of his presidency, and the upgrade suggests that S&amp;P believes he is on the right track.



“Expectedly, the upgrade of Nigeria&#8217;s credit outlook is likely to have a number of positive implications for the country. It will make it easier for Nigeria to borrow money from international lenders, which will help to finance the government’s investment plans. It will also make Nigeria more attractive to foreign investors, which will help boost economic growth.



Arinzeh believes that the S&amp;P credit outlook upgrade is also a major boost for Tinubu’s presidency and his planned reforms.



“It is a sign that the international community is supportive of his efforts to improve Nigeria&#8217;s economy, and it will make it easier for him to implement his plans.”



Nigeria still faces significant economic and social challenges, such as high fiscal spending, low revenue mobilization, high inflation, weak governance, and security issues. However, the ratings agency projected that the elimination of the petrol subsidy and the securitization of the ways and means advances will generate fiscal savings of around 2.5% of Gross Domestic Product (GDP) in 2023.



S&amp;P also warned of potential geopolitical risks stemming from the recent coup in neighboring Niger, where a military junta overthrew President Mohamed Bazoum on July 26. Niger is a key partner of Nigeria in the fight against militants in the Sahel region, where groups such as Boko Haram have been active for years.



The coup has raised concerns about the stability and security of the region, as well as the prospects for democratic transition and regional cooperation.

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Tag: Credit Outlook

FORBES AFRICA SOCIAL MEDIA

Moody’s Upgrades Rwanda’s Outlook To Stable, Economy On Recovery Path

S&P Global Ratings Strengthen Nigeria’s Credit Outlook