Kenya: Fitch Downgrades Kenya's Rating to Negative On High Debt

Nairobi - The international rating agency Fitch has lowered Kenya's rating from stable to negative due to the increased burden of repaying its debts.

On Thursday, the agency reassessed Kenya's long-term foreign-currency Issuer Default Rating (IDR), changing it from stable to negative. However, they maintained the IDR at 'B'.

The downgrade is caused by greater limitations in obtaining funds from outside sources due to the high need for financing, which includes the repayment of a Eurobond worth $2 billion (equivalent to Sh283.6 billion) in 2024. Additionally, it is also influenced by the decrease in international reserves, the mounting expenses associated with securing financing, and the uncertainty surrounding the path of government spending.

Fitch stated in a statement that they are affirming Kenya's rating considering the country's substantial government debt and external indebtedness, as well as its limited revenue sources. However, they also took into account the government's dedication to fiscal consolidation, which is supported by the IMF program, and the country's promising prospects for growth in the medium term.

The organization also foresees a significant increase in the expenses related to servicing debts owed to external sources. These expenses, encompassing both the repayment of principal sums and the interest accrued, are estimated to reach $4.3 billion (equivalent to Sh609.74 billion) by the conclusion of the fiscal year in June 2024.

The experts warn that the global tightening cycle may continue to create difficult market conditions until 2024. This poses a major challenge for the authorities who intend to secure funding for the Eurobond in international markets.

Likewise, it anticipates that the nation's reserve will decrease to $7 billion (equivalent to Sh992.6 billion) by the conclusion of 2024, compared to $8 billion (equivalent to Sh1.1 trillion) at the end of 2022. This will bring the reserve to an amount equal to 2.8 months of present external payments, which is lower than the estimated 'B' median of 3.4 months.

Nevertheless, the alliance administration encounters escalated societal strains, such as intermittent demonstrations orchestrated by ex-presidential contender Raila Odinga, who asserts that the elections were manipulated. Additionally, civil organizations are mounting legal obstacles against the government's tax hikes.