On 11 March 2016, S&P revised its outlook on the long-term ratings on Rwanda to negative from stable but affirmed the ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings.
In a statement S&P said that the revision reflected increasing risk to Rwanda’s external accounts due to depressed commodity prices, a deteriorated mining sector and a rising current account deficit. S&P expects the deficit to average more than 12 per cent of GDP over 2016-2019.
According to estimates S&P cited from the central bank, the National Bank of Rwanda (BNR), mining exports accounted for a third of the country’s goods exports in 2014. The subsequent decline in global commodity prices has reduced the sector’s foreign currency earnings by over 40 per cent in US dollar terms in 2015.
S&P noted that at the same time, strong consumption and investment dynamics have kept import growth elevated, leading to its high deficit forecasts and pressure on the exchange rate. The ratings agency predicts that the Rwandan franc depreciated by about eight per cent last year while the BNR’s reserves declined by close to 15 per cent.
It noted that with the exception of 2012, this is the first decline in reserves since 2003.
Also according to BNR estimates, commercial banks’ net foreign assets have declined by over 70 per cent to $40 million at end-2015.
S&P estimates that gross external debt, net of liquid public and financial sector external assets grew from $1.3 billion in 2014 to over $1.7 billion in 2015, or about 90 per cent of current account receipts in 2015, up from 60 per cent a year before.