Moody’s Holds Kenya Rating, Debt 62pc GDP

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November 26, 2019//-Rating agency Moody’s has maintained Kenya’s sovereign credit rating and described the outlook as stable, reflecting the persistence of the weaknesses identified early last year.

The rating stands at B2, after it was lowered from B1 in February last year. The cause of the continued lower rating includes high public debt level driven by a high fiscal deficit as well as weak institutions.

“Kenya credit profile is constrained by high and rising government debt as well as subdued government revenue. The government debt-to-GDP ratio increased to 62 percent of GDP as of end of fiscal year 2019 from 49 percent in fiscal 2015, while interest payments rose to 22 percent of government revenue from 15 percent over the same period,” said Moody’s.

Among the strengths the country has, the agency noted, are a diversified economy with multiple growth sources, favourable prospects and resilience to shocks. Others factors are the deep capital markets and a mature financial sector relative to regional peers.

The strong capital and financial markets affords the government greater capacity to issue securities domestically, that is, in local currency and with long tenors. Currently the longest tenor is 30 years.

“By contrast, Kenya’s credit strengths include its diversified economy with multiple growth sources, favourable growth prospects and demonstrated resilience to shocks,” said Moody’s.

The rating agency said that the stable outlook reflects its expectation of relatively strong economic growth, counterbalanced by large fiscal deficits and debt.

It noted that strong external buffers — including foreign exchange reserves covering close to six months of imports — mitigate the country’s vulnerability to a worsening in the external environment.


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