The escalating conflict between Rwanda and the Democratic Republic of Congo (DRC) has raised concerns about the potential negative impact on the credit ratings of both countries. S&P Global Ratings has warned that the economic strain caused by the war could weaken the financial stability of Rwanda and the DRC.
Rwanda, which heavily relies on foreign aid for its budget, faces the risk of losing this crucial financial support. On the other hand, the DRC may struggle with increased defense expenditures, putting a strain on its finances. The presence of a Rwanda-backed rebel group in eastern Congo has heightened fears of a broader regional conflict, as reported by Reuters.
S&P Global Ratings expressed particular concern about the M23 rebel advance into Goma and their ongoing offensive, which has intensified the risks to both countries’ credit ratings. The clashes in eastern Congo have persisted, with M23 rebels moving towards Bukavu in South Kivu province.
The rating agency warned that continued fighting could widen Congo’s budget deficit and discourage foreign investment. Rwanda, on the other hand, may face reductions in concessional loans and donor funding due to international condemnation of its alleged involvement in the conflict. This could have a significant economic impact on Rwanda, which relies heavily on concessional financing and donor support for its economic growth.
S&P Global Ratings highlighted that Rwanda’s economic growth slowed significantly after foreign aid cuts following the M23 rebellion in 2012. A similar reduction in aid due to the ongoing conflict could further destabilize the country’s economy. Rwanda currently holds a $620 million Eurobond maturing in 2031, and prolonged conflict could lead to currency depreciation and increased debt servicing costs.
The M23 rebels claim to be fighting for the rights of Tutsis and other Kinyarwanda speakers in Congo, while the Congolese government accuses the group and Rwanda of seeking to exploit the country’s mineral resources. Despite Congo’s vast natural wealth, much of it is smuggled into neighboring countries, limiting its economic benefits. However, the immediate economic impact on Congo remains minimal, as the conflict-affected region contributes only a small portion of its official revenue and growth.
Congo’s primary export revenue comes from its large copper and cobalt mines in the southeastern region, which are far from the conflict zone. S&P currently rates the Democratic Republic of Congo at B-/B with a stable outlook and Rwanda at B+/B, also with a stable outlook. The ongoing conflict between the two countries poses significant economic risks that could affect their credit ratings and financial stability.
