KENYA'S credit worthiness has worsened compared to its regional peers South Africa and Nigeria, analysts said yesterday, citing huge current account and budget deficits.
Researchers at Standard Chartered Bank however expect spending cuts pledged by the National Treasury from next month to help boost the diminishing confidence.
Treasury CS Henry Rotich is next month expected to propose a raft of budget cuts through a supplementary budget for this financial year to June next month and on into the next financial year.
This is expected to reduce the Sh570.1 billion deficit in the Sh2.1 trillion 2015/16 budget, easing the pressure on government to borrow to fund its functions.
The analysts said the country's creditworthiness has largely taken a beating in international markets with investors worried about faster growth in the amount spend on servicing debt compared to rise in exports.
“External debt is not alarming in Kenya's context. What do look bad is the amount of the external debt service as percentage of exports. ” the bank's London-based chief economist for Africa Razia Khan told a press conference in Nairobi.
Khan cited the recent development where investors are demanding a higher premium on Kenya's 10-year Eurobond on the Irish Stock Exchange's secondary market than oil-dependent Nigeria.
“It is very interesting that the widening of spreads on Kenya (Eurobond) actually exceeded that of Nigeria which is an oil producer,” she said. “So the perception seems to be more of deterioration in Kenya's credit worthiness than it what is the case in Nigeria ...(which is) dependent on oil for 95 per cent of its foreign exchange earnings and traditionally about 70 per cent of its fiscal revenue.”
Razia said investors want to see the benefits of growing debt through transformative infrastructural projects and growth in exports.