Fitch Affirms Rwanda at ‘B+’ with Negative Outlook
Fitch Ratings has affirmed Rwanda’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a negative outlook, its latest update revealed.
The ratings agency said Rwanda’s ‘B+’ rating with a negative outlook reflects its low gross domestic product (GDP) per capita and persistent twin budget and current account deficits (CAD).
According to the rating note, these have resulted in high and rising public and external indebtedness, and a rising interest/revenue ratio.
“These weaknesses are balanced by the highly concessional nature of the country’s debt, strong governance indicators relative to peers, high growth potential, and a record of strong multilateral support”, Fitch said.
Amidst rising government debt, ratings analysts expect the country’s debt/GDP to increase to 81% in 2025 and 83.5% in 2026, from 77.8% in 2024.
This will be driven by wide (albeit narrowing) fiscal deficits and high below-the-line spending associated with the government’s equity participation in the expansion of the Bugesera airport.
“Our forecasts imply a significant increase in government debt from 72.3% in 2023 to well above the ‘B’ median of 50% of GDP we project for the same period”.
Fitch ratings baseline is for government debt to gradually decline after 2026 (to 82.9% in 2027), but there are material upside risks to the forecast.
The rating note identified higher-than expected costs associated with the Bugesera airport could translate into higher government equity contributions to the project. Fitch said a failure to narrow the fiscal deficit could also translate into a higher government debt/GDP trajectory.
The escalation of the armed conflict in the eastern Democratic Republic of the Congo (DRC) in 1Q25 led to donor backlash against Rwanda, translating into the pausing or suspension of bilateral aid from countries including Germany, Belgium and the UK.
In Fitch’s view, the subsequent diplomatic efforts to address the escalation have reduced the likelihood of cuts extending to capital grants and concessional loans from the official sector.
The military situation is broadly unchanged, with the Congolese rebel paramilitary group M23 remaining in control of Bukavu and Goma. Rwanda, the DRC and the M23 rebels have engaged in separate talks mediated by the US and Qatar.
The prospects for resolution of the conflict are unclear and a re-escalation is possible. Previous ceasefires and agreements were breached or not respected between 2023 and 2024 and failed to translate into a lasting suspension of the conflict.
Fitch however stated that debt concessionality mitigates risks, saying close to 87% of the government’s external debt is concessional, translating into favourable affordability metrics.
The average time to maturity of the government’s external debt is 20 years, with an average weighted interest rate of 2.2%.
Ratings analysts project total debt service to amount to 30.0% of revenue over 2026-2027, well below the ‘B’ median of 46% for the same period.
The next Eurobond amortisation is due in 2031, following the repayment of its 2013 Eurobond in 2023. However, interest to revenue has risen from 5% in 2019 to an estimated 12% in 2025, compared with 16% for the ‘B’ median.
Real GDP growth remained robust in 1H25, at 7.2% year on year, following growth of 8.9% in 2024. Fitch expects real GDP growth to average 7.2% over 2025-2026, driven by strong investment (including the expansion of Bugesera airport), robust labour market dynamics, and continued expansion in tourism.
Rwanda’s real GDP growth will be well above the forecast 4% average for the ‘B’ median over the same period. Fiscal deficit is projected to narrow gradually, according to the ratings note.
The country’s fiscal deficit narrowed to 5.1% of GDP in the fiscal year ending in June 2025, from 6.4% in FY24, reflecting higher tax revenue and expenditure containment.
“We expect the deficit to narrow further to 4.4% by FY27. This will be driven by higher tax revenue – with the phasing out of tax exemptions-, which should offset a decline in grant disbursements.
“We assume expenditure will remain broadly unchanged over the period, with higher interest payments and subsidies offset by lower capex and spending rationalisation”.
Fitch expects Rwanda’s CAD to be broadly unchanged from 2024, at close to 13% to 2027, reflecting strong economic activity and imports associated with the expansion of the Bugesera airport.
The CAD will be financed by government borrowing and strong foreign direct investment inflows, ensuring international reserves’ coverage of current external payments remains at four months (in line with the ‘B’ median of 4.2 months for the same period). Daily FX Rate – GTBank Sells Dollar at N1,495 for Foreign Payment
