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Moody's to issue credit rating on Kenya

The drop from B2 from B1 meant that Kenya's risk of defaulting on loans was high, a caution to creditors. The poor rating also saw Kenya's cost of borrowing surge.

In Summary
  • It said Kenya's issuer rating is still at B2, supported by "moderate" economic strength
  • The National Treasury has in recent times rolled out strategies aimed at cutting the country's fiscal vulnerability. 
The Treasury Building. Senate, National Assembly feud over funds for counties.
TREASURY BUILDING: The Treasury Building. Senate, National Assembly feud over funds for counties.
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Moody's Investors Service has completed the periodic review of Kenya credit rating and is expected to release its report any time.

In a statement issued Tuesday, the rating agency said  it could not guarantee the timing of giving a new credit rating opinion.

“Moody's has now completed the periodic review of a group of issuers that includes Kenya and may include related ratings,''the US based agency said.

 

It added that the review did not involve a rating committee, hence the  publication does not announce a credit rating action. 

The agency, however,  reiterated that Kenya still held an issuer rating of B2 that is supported by its "moderate" economic strength, which reflects the relative diversification of the economy and high growth rates, despite low wealth levels.

It however said that Kenya's  debt burden and poor revenue collection performance; and susceptibility to event risk predominantly stemming from government liquidity risk could pile pressure on the country’s ratings.

Moody's also blamed the country's poor governance rating of "B1", which reflects  weak policy effectiveness and credibility, weak rule of law and elevated corruption as other negative attributes that may hurt its debt rating. 

In 2018, the agency  downgraded Kenya’s sovereign creditworthiness from a notch lower due to rising liquidity risk, increased external vulnerability and higher reliance on commercial external debt.

The drop from B2 from B1 meant that Kenya's risk of defaulting on loans was high, a caution to creditors. The poor rating also  saw Kenya's cost of borrowing surge. 

Kenya’s public debt as at December  last year surged past to Sh6 trillion, with the stock of foreign loans increasing  by Sh462 billion to reach Sh3.1 trillion while domestic debt hit Sh2.94 trillion, this according to Central Bank of Kenya.

 

''This document summarizes Moody's view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period,’’ it said.

Moody's opinion on Kenya is coming just days after the International Monetary Fund (IMF) maintained the country's  debt risk at moderate, citing improving debt management plan that is focusing on cheaper and long tenor local loans.

The Bretton-Woods institution urged Nairobi to opt for concessional loans to refinance its debt as opposed to commercial credit, which would allow it to stretch maturities.

The National Treasury has in recent times rolled out strategies aimed at cutting the country's fiscal vulnerability. 

In November last year, the government came up with a supplementary budget for the current financial year after slashing part of its budget. 

It has also put a cap on borrowing at Sh9.1 trillion and formulated a debt policy that will see  the formation of two bodies to oversee international and local borrowing.