WE have all seen emerging African Sovereigns ratings after ratings. We have witnessed African nations’ financing credibility being downgraded—note the most recent South African Issuer Default Rating (IDR) slide, a notch away toward junk status.
On Friday, the UK-based Fitch ratings—one of the most respected rating agencies in the world, after Standard&Poors and Moody’s—published a new scorecard for Rwanda. And this is another upgrade to B+ with “Positive Outlook”. This rating is based on the recent consistent economic gains, leadership stability and the expected future positive momentum.
So what does Rwanda’s B+ with “positive outlook” means?
Speaking for myself, a typical average Rwandan who has seen this same scorecard being upgraded back to back, I have a great confidence in the future of this nation. And it seems like I share the same guidance with Fitch.
Not long ago, Rwanda’s IDR was rated at B-, which is one of the lowest levels amongst the non-investment grade ratings. This means, at B-, lenders believed that there is a much higher chance that this nation could default on loans payment in the future. Therefore, they were not only very reluctant to put faith in Rwanda, but even those who did would charge a very high interest as a way to hedge against credit risk.
Today, we have proven to be a safer and safer haven for long-term debt lenders. They have more confidence in Rwanda than ever before. They are comfortably investing in our future through long-term financing or venture capital for local businesses.
The key word here is “Positive Outlook” which means today’s Fitch’s forecast shows great signs of more economic strength as well as stronger debt payment credibility. The next stop is BB-, and so on and so forth. As we know it, the better the rating, the easier the financing process and of course the cheaper it gets since interest rates go lower and lower as nations’ credibility increases.
This kind of rating does not just serve for the nation’s borrowing ability alone. This is a leading indicator for what is yet to come. This rating gives foreign long-term investors an insight of what to expect as they plan; they anticipate capital allocation in our private sectors. That is what we, as Rwandans, are looking for. Not necessarily a highly leveraged nation, but a private-investment-led economy.
And Rwanda is the one to entrust for this.
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