Bulletin: M23 Fighting Could Harm Credits Metrics Of Both Democratic Republic Of Congo And Rwanda

This report does not constitute a rating action. PARIS (S&P Global Ratings) Feb. 6, 2025--S&P Global Ratings said today that the sharp escalation of tensions in the eastern region of the Democratic Republic of the Congo (DRC; B-/Stable/B) could potentially have differing fiscal and financing implications for both DRC and Rwanda (B+/Stable/B). Regional security tensions have long posed downside risks to the ratings on both sovereigns but the M23 rebel advance into Goma on Jan. 26 and 27, 2025, and subsequently further into North and South Kivu, marks an intensification of these risks. While M23 announced a ceasefire on Feb. 4, how the conflict will develop is uncertain. Below we outline the key credit considerations and transmission mechanisms through which

...DRC Rwanda Increased political instability threatening the current administration's reform agenda. Rising risk of sporadic attacks within Rwandan borders. Political stability Risk of refugee crisis heightening further. Spending Marginally higher fiscal deficit to increase security spending. Rwanda is more susceptible to risks stemming from the loss of concessional and donor funding which would lead to a sharp fall in capital expenditure. Investment outlook Lower level of local and foreign investment levels resulting from greater political instability and translating in slower growth. Possible large, indirect impact, causing a slowdown in the government-led growth model, reduction in infrastructure spending, and reduced tourism. Limited impact because of limited ability to raise financing. Limited immediate risk to external commercial public debt payments ($620 million Eurobond matures in 2031). Funding Sovereign public debt represents about 15% of GDP as of 2024. 66% external, out of which...

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