Moody’s has downgraded Kenya's credit ratings from BI to B2
Kenya's public debt crossed the Sh4 trillion mark at the end of March last year.
Global rating agency Moody’s has downgraded the country’s credit scores, citing pressure from the country’s rising debts.
“The drivers of the downgrade relate to an erosion of fiscal metrics and rising liquidity risks that point to overall credit metrics consistent with a B2 rating,” explained Moody’s of its move on Tuesday.
Kenya which depends on external loans to finance its budget and infrastructural projects will now find it hard to borrow from international financial markets since the loans will be deemed high risk and chances of default high.
The country has an insatiable appetite for loans in recent years and her public debt crossed the Sh4 trillion mark at the end of March last year, with the government indicating it may borrow even more despite the Kenya Revenue Authority (KRA) struggling to meet its revenue collection.
Last October, Moody announced it had placed Kenya’s B1 rating on review for downgrade due to persistent deficits amid high borrowing costs and on Tuesday finally downgraded the issuer rating of the Kenya government to B2 from B1 but assigned a stable outlook.
The treasury has defended itself in the past saying the debt was still under control despite numerous warning from financial bodies such as International Monetary Fund which has already asked the government to seek ways to reduce the country’s fiscal deficit and even sent an economic review team to Kenya over the spiralling public debt.
The Central Bank of Kenya (CBK) last month also, warned the country’s headroom for more public debt is narrowing.
Moody's said it expects Kenya's fiscal metrics to continue to “deteriorate”, as large primary deficits combine with “worsening debt affordability and rising debt levels.”
“The fiscal outlook is weakening with a rise in debt levels and deterioration in debt affordability that Moody's expects to continue.”
Moody's forecasts government debt to increase to 61 per cent of GDP in fiscal year 2018/19 (the year ending in June 2019), from 56 per cent of GDP in FY 2016/17 and 41 per cent of GDP in FY 2011/12.
Recent forecasts indicate that Kenya’s borrowings could soon take the debt load past 60 per cent of GDP.
JOIN OUR PULSE COMMUNITY!
Eyewitness? Submit your stories now via social or: