NAIROBI, Kenya, Jan 25 — Credit rating agency Moody’s has revised Kenya’s outlook from negative to positive.
The agency attributed the outlook change to an improved likelihood of easing liquidity risks and better debt affordability over time.
Moody’s finding released on Friday highlighted signs of reduced domestic financing costs due to recent monetary easing measures and the Kenyan government’s efforts to enhance fiscal management.
The positive shift indicates that if the government continues its fiscal consolidation and effectively manages social demands, liquidity challenges could diminish further.
The agency acknowledged that while Kenya’s debt affordability remains weak and its external debt burden is high, the country’s resilience to economic shocks, diversified economy, and relatively developed local capital markets provide a measure of stability.
These strengths have been instrumental in supporting Kenya’s credit profile despite challenges such as corruption, institutional weaknesses, and unpredictable fiscal policies.
“The change in outlook to positive reflects the increasing likelihood that Kenya’s liquidity risks will ease and its debt affordability will improve over time,” Moody’s stated.
However, despite the improved outlook, the Caa1 rating indicates that Kenya continues to face significant credit risks.
Persistent challenges include high fiscal deficits, large financing needs, and limited funding options. Additionally, environmental and social risks, including climate change, pose ongoing threats to the country’s long-term economic stability.
Moody’s noted that the government’s fiscal measures, such as enhanced revenue collection efforts, show promise for improving debt sustainability in the near term.
Nevertheless, these measures must translate into a more stable fiscal environment for Kenya to achieve sustained improvements in its credit ratings.
The agency outlined that an upgrade could be possible if domestic financing conditions improve further and fiscal consolidation leads to tangible reductions in liquidity risks and better debt affordability.
Conversely, a reversal of positive trends—such as a failure to implement effective fiscal reforms or a rise in borrowing costs—could result in a downgrade.
