Global rating firm Moody’s downgraded Kenya’s rating from B1 to B2 in February last year due to persistent deficits as high borrowing costs continue to push the country’s indebtedness higher, among other factors.
“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.
The government has, however, continued to defend itself over excessive borrowing saying the country must invest in its infrastructure, including roads and railways.
In the year ended June, Kenya spent Sh826.20 billion ($8.262 billion) on debt repayments or 55.4% of the Sh1.49 trillion (14.9 billion) tax collected in the period.
It's not all doom for Kenya though, 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 and with long tenors.
“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.