S&P Latest to Downgrade Kenya's Credit Rating After Fitch, Moody's
TLDR
- Kenya's credit rating downgraded from "B" to "B-" by S&P on August 23, 2024, signaling fiscal and debt concerns.
- Concerns rose due to Kenyan government's abandonment of proposed tax increases meant to stabilize public finances.
- Fitch and Moody's also downgraded Kenya's credit ratings, indicating widespread worry over the country's financial situation.
Kenya's financial standing has taken another hit as the American credit rating agency Standard & Poor's (S&P) downgraded the nation's long-term sovereign credit rating from "B" to "B-" on August 23, 2024.
This downgrade follows similar actions by Fitch and Moody's, further signaling growing concerns over the country's fiscal and debt outlook. The outlook remains stable, while the short-term rating is maintained at "B."
S&P cited the Kenyan government's recent decision to abandon proposed tax increases, originally intended to stabilize public finances, as the primary reason for the downgrade.
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Key Takeaways
S&P's assessment reflects apprehension that Kenya's medium-term fiscal and debt conditions will deteriorate, made worse by the decision to retract key fiscal measures outlined in the 2024/2025 Finance Bill. Although the government has attempted to mitigate the impact by reducing expenditures, the budget deficit is expected to widen to 4.3% of GDP, up from the initially projected 3.3%. Kenya also faces the challenge of repaying $2 billion annually over the next three financial years (2025-2027). The country's debt, estimated at $78 billion, has seen its debt-to-GDP ratio balloon from 39.8% in 2013 to 73.3% by the end of 2023, far exceeding the 55% threshold recommended by the Bretton Woods institutions.
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