S&P raises Kenya’s credit rating to ‘B’ as liquidity risks ease
S&P expects Kenya's solid economic growth and improved liquidity outlook to offset pressures stemming from high interest costs
Global credit ratings agency S&P upgraded Kenya's long-term sovereign credit rating to 'B' from 'B-' on Friday, citing reduced near-term external liquidity risks.
"Robust export earnings and diaspora remittances have strengthened Kenya's foreign exchange (FX) reserve position, helping to ease liquidity risks related to high external imbalances," the Credit Rating Agency said.
"Eurobond amortisation will remain manageable over 2025-2027, supported by debt liability operations earlier this year."
S&P expects Kenya's solid economic growth and improved liquidity outlook to offset pressures stemming from high interest costs and a slow fiscal consolidation process.
President William Ruto said on Wednesday that Kenya's economic growth this year is expected to exceed official forecasts despite higher U.S. tariffs and other challenges.
The economy is expected to grow by 5.6% this year, he added, which is above the Kenyan finance ministry's forecast of 5.3% and the central bank's projection of 5.2%.
Kenya recorded an economic growth of 4.7% a year ago. The agency maintained the country's outlook at 'stable'.
The upgrade comes against persistent fiscal strains. The budget deficit is expected at 5.5% of GDP in FY2026, with interest costs consuming roughly a third of revenue, among the heaviest burdens of any sovereign in S&P’s coverage.
The withdrawal of IMF concessional funding earlier this year has also pushed the government toward more expensive financing, including a $500 million UAE loan priced at 8.25%.
S&P said Kenya’s stable outlook balances reduced external risks with ongoing fiscal vulnerabilities. An upgrade would require clear evidence of fiscal discipline and lower borrowing costs, while any renewed pressure on reserves or distressed debt operations could trigger a downgrade.
In August 2024, the credit ratings agency downgraded Kenya's rating on Friday to "B-" from "B," citing the repeal of the country's 2024/2025 Finance Bill, which it said will slow its fiscal consolidation.
"The downgrade reflects our view that Kenya's medium-term fiscal and debt outlook will deteriorate following the government's decision to rescind all tax measures proposed under the 2024/2025 Finance Bill," S&P said.
