NAIROBI, Kenya, July 21 – Global rating firm Fitch has downgraded Kenya’s rating from stable to negative due to elevated debt repayment.
The agency on Thursday revised the Outlook on Kenya’s long-term foreign-currency Issuer Default Rating (IDR) to negative from stable and affirmed the IDR at ‘B’.
It attributes the downgrade to increased external financing constraints amid high funding requirements, including a $2 billion (Sh283.6 billion) Eurobond maturity in 2024, weakening international reserves, rising financing costs, and uncertainty on the fiscal trajectory.
“The rating affirmation balances Kenya’s relatively high government debt and external indebtedness and its narrow revenue base against the authorities’ commitment to fiscal consolidation anchored by the IMF programme and strong medium-term growth prospects,” Fitch said in a statement.
The agency also predicts that the cost of servicing external debt (amortization and interest) will rise steeply to $4.3 billion (Sh609.74 billion) in the financial year ending June 2024.
“Our expectation that the global tightening cycle could maintain unfavourable market conditions into 2024 is a significant headwind for the authorities who plan to refinance the Eurobond in external markets,” it added.
Similarly, it expects the country’s reserve to dip to $7 billion (Sh992.6 billion) at the end of 2024 from $8 billion (Sh1.1 trillion) at the end of 2022, lowering the reserve to an equivalent of 2.8 months of current external payments below the projected ‘B’ median (3.4 months).
“However, the coalition government faces heightened social pressures, including sporadic protests led by former presidential candidate Raila Odinga over his claims of election-rigging as well as legal challenges by civil society groups against government tax increases.”
