This archive report was first published on 8 May 2020.
Kenya's credit rating outlook has been revised to negative by Moody's, a leading credit rating agency, due to the country's costly loans and high debt obligations.
According to Moody's, Kenya's large gross borrowing requirements pose a significant risk to the country's credit rating. The agency has maintained the country's B2 credit rating, but warned that a downgrade to B3 is possible in its next review.
Moody's noted that Kenya has huge debt obligations, including the need to spread overpayments of external loans and refinance short-term domestic loans, most of which will mature before the end of June.
Should Kenya's rating be downgraded to B3, it will join the ranks of fiscal miscreants such as Ghana, which nearly defaulted on one of its external loans.
Kenya's B2 debt issuer status is considered speculative and is subject to high credit risk. The country has been issuing Eurobonds at a relatively higher rate, but a notch lower is B3, which is highly speculative and whose chances of defaulting are high.
Moody's warned that Kenya faces a high exchange and interest rates, as the country pays more for borrowing. The agency also noted that while Kenya does not face acute financing pressures, the severe tightening of financial conditions will challenge the government's ability to meet larger gross financing needs without an increase in borrowing costs that would threaten medium-term fiscal consolidation efforts.
