Rwanda credit profile reflects institutional strength - Moody's

Rwanda's credit rating has been in the spotlight recently as Moody's Investors Service highlighted the country's robust institutional framework in a recent note. The East African nation stands out amongst its Sub-Saharan African peers due to its strong institutional and structural reforms, which play a significant role in supporting its credit strength. Elisa Parisi-Capone, Vice President and Sovereign Analyst at Moody's, joined CNBC Africa to discuss Rwanda's credit profile and the factors influencing its stability. According to Parisi-Capone, Rwanda's landlocked economy, small size, and large external advances pose potential credit risks, particularly on the political front. However, the country's strong institutional framework has helped maintain its B2 rating with a stable outlook. One key factor affecting Rwanda's credit profile is the denomination of public debt in foreign currency, which can have significant implications for the economy. Despite facing pressure, especially from the US dollar, Rwanda's ability to finance its current account without depleting foreign exchange reserves will be crucial for its future exchange rate stability. In recent years, Rwanda has managed to maintain its reserve coverage at around four months, partly due to assistance from the IMF's standby credit facility. This, along with the country's ability to preserve its foreign exchange buffer, supports Moody's stable outlook for Rwanda in its central scenario. Additionally, Rwanda's ambitious public infrastructure projects, such as the Bujesera Airport and the Kigali Convention Center, are important drivers of economic growth. These projects are part of the government's strategy to position Rwanda as a regional hub for tourism and business services. The funding structure of these projects, particularly the use of public-private partnerships, is crucial for safeguarding Rwanda's public debt ratio and ensuring debt sustainability in the future. This consideration further underpins the country's stable outlook. Looking ahead, Rwanda is considering issuing another Eurobond, following its successful issuance in the past. Moody's views Rwanda's foreign debt composition favorably, citing the country's efficient fund utilization and access to concessional funding sources. Rwanda's prudent borrowing practices have helped keep interest costs low and debt affordability high compared to other countries that rely more heavily on international capital markets. While taking on another Eurobond is an option for Rwanda, Moody's will continue to assess the country's debt affordability and sustainability in future evaluations. Overall, Rwanda's credit profile reflects its institutional strength, resilience, and prudent financial management, positioning it favorably in the eyes of credit rating agencies and investors.