S&P maintains Rwanda’s B credit rating

Standard & Poor’s Ratings Services revised Rwanda’s long term credit rating to stable from positive, citing weakening external environment with donors who suspended or delayed aid to the country.“The stable outlook reflects our view that aid suspension will be short term and that the government will take offsetting measures to ensure that the impact on fiscal performance is limited,” a statement from A&P reads. The rating company affirmed the long- and short-term sovereign credit ratings at ‘B/B’.According to the rating company, there has been a spike in regional tensions between Rwanda and the Democratic Republic of Congo government over the possible role that Rwanda may be playing to support a rebel group that separated from the Congolese army in April. This prompted several donors, including the United Kingdom, The Netherlands, and Germany, to suspend or delay some of their donor assistance to Rwanda, estimated at around 15 per cent of total budgetary support expected in the 2012/13 fiscal year, the agency said. S&P threatened to lower the ratings if government’s external liquidity is to deteriorate significantly, due to an extended delay in aid disbursements and the ratings could also come under pressure if regional conflicts affect Rwanda’s economic performance and if fiscal performance weakens.However, it could be raised if the country’s reform momentum translates to a tangible broadening in its growth and export base, and if the monetary policy framework is strengthened while safeguarding macroeconomic and financial sector stability.Central bank Governor, Amb.Claver Gatete, said the ratings firm responded to donors who use aid as a political tool and against the aid effectiveness policy.“The rating is reacting to threats from some donors but what they can not question is our macroeconomic fundamentals because they are strong,” Amb.Gatete said in a telephone interview.Amb.Gatete said that there was an agreement not to politicise the aid issue.“There is a clear way to phase out and not when the budget has been approved, but this strengthens us to bridge short term gaps, because we will not get children out of school nor let people die since the budget is delayed,” he assured. Rwanda’s economy expanded by 9.9 per cent in the months running through April to June compared to 6.1 per cent in the same period last year. It is expected to meet the 7.7 per cent growth target for this year. The services sector was the main driver of the economy with a growth rate of 14 per cent, while the transport, storage, communication sector expanded by 21 per cent.Inflation also declined to 5.6 per cent in September 2012 from 8.4 per cent at the end of 2011, mainly driven by lower commodity and food prices. “Our economy is resilient; Yes, they disorganised us (government) by some projects being delayed which compelled us to re-design our strategies to do away with aid,” Gatete stressed.According to a statement, on the basis of its sound macroeconomic framework, Rwanda has been able to effectively use the donor assistance that it has received over the last two decades.