Moody’s Rating has upgraded Kenya’s current sovereign debt position to B3 from Caa1 citing a decline in near-term default risk.
The global rating agency upgraded the country’s local and foreign currency long term issuer ratings and foreign currency senior unsecured debt rating and changed the outlook to stable from positive.
“The stable outlook reflects our expectation that Kenya will sustain the recent improvements in external liquidity and funding flexibility. Kenya’s relatively large and diversified economy and solid medium-term potential provide some capacity to absorb shocks, but a long a track record of recurring revenue underperformance and weak fiscal execution constrain fiscal policy effectiveness,” said Moody’s in a statement.
According to the firm, Kenya has had strong external liquidity supported by improvements in the foreign exchange reserves.
Analysis by Moody’s shows Kenya’s international reserves increased to $12.2 billion by close of last year equivalent to 5.3 months of import cover, compared to $9.2 billion as at the close of 2024. The higher foreign exchange reserve is also seen as adequate to provide sufficient buffer for near-term shocks.
“Reserve accumulation has been supported by the central bank’s net foreign currency purchases alongside stronger foreign exchange inflows,” Moddy’s noted.
The American credit agency also noted that Kenya has narrowed its current account deficit to 1.3pc of GDP in 2024 from 5.2pc in 2021 supported by improved remittances inflows, higher exports and large service surplus.
This helped ease balance of payment pressures as well as the rise in the accumulation of forex reserves.
The National Treasury move to float two Eurobonds last year to raise a total of $3 billion to buy back $1.2 billion of maturing bonds between 2026 and 2028 have also helped ease Kenya’s debt pressures and lift the country out of the default territory as per Moody’s analysis.
“These transactions have smoothed the external maturity profile and effectively pushed the next large eurobond maturity to 2030,” it noted.
Moody’s now project fiscal deficit to remain at 6pc of GDP with public debt remaining at 67pc of GDP.
