Moody’s Upgrades Rwanda’s Outlook to Stable: A Closer Look at the Country’s Economic Recovery

Now, 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’s credit profile in response to shocks. For more, we spoke to Ted Kaberuka, Partner at Centrix Group. Well, Moody’s rating Rwanda’s economy, just for people to understand that we have independent agencies which can rate economies depending on different factors, including the fiscal policy, the financial policy and the macroeconomic environment. With those ratings, they help international investors to assess the risk when they go to the country. So, they vary from A, B, C, D and F, depending on the score of the country. B, of course, A is the best. B has some levels, 1 and 2. When I do the analysis of B2, I see that it gives promise. It's a good position, but it has some risk around that, especially related to the debt portfolio of Rwanda. So far, Rwanda can be able to reverse all the debts, all the due debts. However, the debt burden is still a risk, a financial risk, as we would put it. Also, all countries are in the recovery stage after COVID and then the war in Ukraine, which has affected the economy of countries. And now, Rwanda is recovering slowly and some sectors are showing high potential than others. Here, I can mention the infrastructure sector, the development infrastructure, the tourism sector, the service sector. Those are sectors with high potential, which has a very high return. However, we still have some issues with the agriculture sector, with very low productivity, and that productivity leads to high interest prices. So, that's, in general, the outlook of the Rwandan economy has reflected. Yeah, you've touched on some of the sectors that are driving this recovery. And from the ratings themselves, there seems to be much confidence in how the country is handling the changing economic landscape. What are the particular policies that have been put in place to anchor the government's credit profile in response to these particular shocks that you've touched on? Well, one of the, I would say, the foundation of the economic stability and recovery is the fiscal policy. The Rwandan government has been very strategic enough to polish and make the tax collection system, the entire tax regime and policy and the tax collection and management in a very smooth way so that each single penny collected by the government can be received by the government, and then government can use it for its own investment and expenditure. This is a very important sector where government puts efforts and it yields results immediately. Also, the strategic decision taken by the government of Rwanda to strengthen the service sector, which will help in shifting the dependency to agriculture to the service sector. So, it's also an area where the service sector keeps growing, starting with the banking, the financial sector, and then the insurance, the transport sector, the telecommunication, the internet stability. Also, that was a very strategic decision taken by the government, which we can see results coming year by year. So, the numbers show that every year there is an increase in revenues in tourism, increase in revenue in the financial sector. If we continue on that pace, in the long run, we can see tremendous changes in the Rwandan economy. But Ted, looking at the rating scale, when you look at sovereign debt, it's at B2, which falls within the highly speculative bracket. How best could we really interpret this without misreading into things? I like the question. Well, if you see the different elements of that rating, one, it shows you the level of debtness of the country, which is very high. That's one risk, actually. The other aspect of that scoring is that as we progress, as Rwanda is paying back the loan, it needs to be very conscious about the debt level so that it won't go beyond the capacity of the country to absorb and be able to repay back. So, much as it's a risky situation, but it's also on a good stance for now. And for those who are managing the debt portfolio need to be very careful not to go beyond the capacity of the economy. There is also another index associated with that, which is the microeconomic aspect of the region, where the economy is operating. So, the rating also assesses the economic stability of the region, being the East African region or the entire Red Lake region. So, it's also associated with that because the region itself is safe, but it can also present some risks which can jeopardise the economy as well. Yeah, as you had said earlier, some of the sectors that are driving this growth that we've seen there, even in the report there, is confident with growing investments within infrastructure as well as tourism. Just looking at this particular rating, what does it tell investors? I mean, and also just looking at the investment landscape within the Rwandan borders. It gives some interesting information for any investor. One, it shows the sector with high return on investments. When they say a service sector is highly increasing year by year, which means whoever would be investing in the service sector will expect a high return on his investments. Two, agriculture is a sector which is not growing. It can also give a sign of potential for investment. If someone would invest strategically, assessing the risk associated with agriculture, the market is huge if any investor would be interested in agriculture, since the agriculture sector has some issues. So, any investment in that sector should be considering the climate shock, the flood, and other aspects of agriculture.

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’s credit profile in response to shocks. Ted Kaberuka, Partner at Centrix Group joins CNBC Africa for more. 

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

Ted Kaberuka, Partner at Centrix Group joins CNBC Africa for more. 

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

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

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