Rwanda

Country risk rating

B2

MEDIUM RISK

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD 10.57bn
Population 11.9mn
Form of state Republic
President Paul Kagame
Next elections 2024, Presidential
  • One of the best business environments in Africa, often better than in some Advanced Economies
  • Growth is high and was not affected by the progressive rebalancing of the policy-mix
  • Poverty decreased visibly in the last 25 years
  • A leading engine in terms of trade openness, trying to organize a regional/continental approach to free trade
  • Foreign currency liquidity is adequate (low debt loads, good import cover of foreign reserves)
  • The development of the capital stock is driving capital goods imports, triggering a structural current account deficit: FDI covers only about 40% of this deficit
  • Increasing financial inclusion implies a strong credit growth, that has to be monitored carefully in order to avoid higher non-performing loans in the future
  • The weak political situation in neighbouring countries (RDC mainly) can reverberate on security issues in Rwanda

High growth

Rwanda is growing fast and did that during a long period. As a result, the country moved from its low income level to a lower middle income level. It means that poverty reduced and that the number of people vulnerable to weather or food prices downturns has reduced as well. Increasing export diversification is also an asset and export growth is a stabilizing force that helps to finance capital goods imports in a more sustainable way.

The country has exhibited a high growth regime during the last decade, with some booms and busts but never with a major downturn (the lowest figure was at +4.7% in 2013). Growth recovered markedly from this low level, but was not immune to some imbalances in the past. The recent growth acceleration (+6.1% in 2017 and +7.7% in 2018) is more sustainable in that way, since it is partly driven by growing exports, and more contained deficits (the current account deficit was -9% of GDP in 2018, compared to -15.8% of GDP in 2016).

Debt is under control

High speed growth also triggers some risks, domestically (credit growth is vibrant to +12% in real terms) and externally (external deficit at -9% of GDP in 2018), but the risks related to debt remain contained (public debt us 42.5% of GDP in 2018) as a result of a limited fiscal deficit (-2% of GDP in 2018). Inflation is generally more contained also than in comparable economies and the current growth acceleration is not expected to imply significant inflationary pressures (inflation is expected at +3% in 2019). The liquidity level remains adequate (FX reserves represent 4 months of imports).

The contained debt growth (debt due is contained to 9.3% of FX reserves) is also giving enough policy space to the government in order to cope with any unexpected downturn. The policy-mix (low inflation, contained fiscal deficit) is also a key asset, since Rwanda exhibits better fundamentals than in comparable economies. The main weakness in the future for Rwanda is perhaps the poor progresses made in neighbouring economies, as well as the still very low trade integration in the region. Be the leader of doing business reform is one aspect, but more would need to be made in terms of overall economic integration in East Africa.

Reforms paved the way to a lower political risk

The World Bank’s Doing Business 2019 survey ranks Rwanda 29th out of 190 economies surveyed. Rwanda is of course one of the best African economies in the overall ranking, easily higher in this ranking compared to the overall income ranking of the country. FDI attractiveness is one of the country’s key assets, allowing it to secure about 4.5% of net FDI inflows per year. The country is among the easiest places to register a property (2nd) or to get a credit (3rd), even better than in many advanced economies, benefitting fully from the country's strategy to develop a e-government able to ease many procedures. However, Rwanda still faces some bottlenecks in order to become a real manufacturing hub, particularly the trading across borders item (88th).

Rwanda has made many progresses from the catastrophic situation of the nineties, when internal fractionalization erupted in a painful civil war. Since then, political stability was among the key assets that has allowed a sustained reform momentum. P. Kagamé is the President of Rwanda since 2000 and was appointed in 2017 for a new term ending in 2024. There is no real opposition in the Parliament, and P. Kagamé has been allowed by a constitutional move to run for two additional terms, ending in 2034. During his mandate, the situation stabilized a lot in the country, and it became an African leader in terms of business facilitation and investments in the tech sector. The agreement on a African Continental Free Trade Area was signed in Kigali in March 2018. The main political risks are related to weak neighbouring states (RDC) and security issues that can suddenly arise from that instability.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
UAE 27%
1
13% China
D.R.Congo 18%
2
12% Uganda
Kenya 9%
3
10% France
U.S.A. 5%
4
10% Kenya
Thailand 4%
5
6% India

Trade structure by product

(% of total)

Exports Rank Imports
Coffee, tea, cocoa, spices, and manufactures thereof 20%
1
15% Other transport equipment
Metalliferous ores and metal scrap 18%
2
6% Telecommunication and sound recording apparatus
Petroleum, petroleum products and related materials 16%
3
5% Non metallic mineral manufactures
Cereals and cereal preparations 9%
4
5% Medicinal and pharmaceutical products
Gold, non-monetary (excluding gold ores and concentrates) 8%
5
5% Road vehicles

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

Contact

Contact Euler Hermes

Economic Research Team

research@eulerhermes.com

Stéphane Colliac

Senior Economist for France and Africa

stephane.colliac@eulerhermes.com

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