Moody’s upgrades Rwanda’s outlook to stable, economy on recovery path

Rwanda recently received a positive boost as global rating agency Moody’s upgraded the country’s outlook from negative to stable. The agency cited Rwanda's effective institutions and credible policies which have preserved and will continue to anchor the government’s credit profile in response to economic shocks. To delve deeper into this development, Ted Kaberuka, Partner at Centrix Group, provided insights during a CNBC Africa interview. Kaberuka explained that the ratings provided by independent agencies such as Moody's play a crucial role in helping international investors assess the risks associated with investing in a particular country. These ratings, ranging from A to F, analyze factors such as fiscal policy, financial policy, and macroeconomic environment. Rwanda's current rating of B2 signifies a promising position with risks, particularly related to the country's debt portfolio. While Rwanda has managed to service its debts so far, the debt burden remains a financial risk that needs attention. The interview also highlighted Rwanda's ongoing economic recovery post-COVID-19 and the impacts of the conflict in Ukraine on global economies. Some sectors in Rwanda, such as infrastructure, tourism, and services, are showcasing high potential for growth and returns. However, challenges persist in the agriculture sector, characterized by low productivity leading to increased interest rates. Kaberuka emphasized the importance of specific policies that have contributed to Rwanda's economic stability and recovery. The government's strategic fiscal policies have streamlined tax collection and management, ensuring that revenues are utilized efficiently for investments and expenditures. Additionally, efforts to bolster the service sector aim to reduce reliance on agriculture, with positive results reflected in increased revenues from tourism and financial services. Despite the positive outlook, concerns linger around Rwanda's sovereign debt rating, currently at B2, categorizing it as highly speculative. Kaberuka noted that while managing the debt effectively is crucial, Rwanda must be cautious not to exceed its capacity to repay debts. The rating also considers the macroeconomic stability of the region in which Rwanda operates, posing potential risks that need to be monitored. Investors eyeing opportunities in Rwanda are presented with a mixed landscape. Sectors like services and infrastructure offer high returns on investments, signaling growth and potential for those willing to venture into these areas. On the other hand, the agriculture sector, although facing challenges, presents opportunities for strategic investments considering the market size and associated risks like climate shocks and natural disasters. In conclusion, Moody's upgrade of Rwanda’s outlook to stable reflects the country’s resilience and proactive policy measures in navigating economic challenges. As Rwanda continues on its recovery path, strategic investments in key sectors could drive sustained economic growth and attract further interest from the investment community.