Standard & Poor’s Decision on Kenya’s Credit Rating Looms Amid Economic Turmoil

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International credit rating agency Standard & Poor’s (S&P) is poised to either downgrade Kenya’s B credit score to B- or maintain a negative outlook in its upcoming review scheduled for August 23. This potential downgrade highlights the increasing risks of debt default, making it more challenging and costly for the country to access international credit.
S&P Global’s lead analyst for Kenya, Giulia Filocca, stated that the agency will take a cautious approach, waiting to evaluate the evolving socio-economic landscape following recent anti-government protests that resulted in the abandonment of proposed tax hikes and the dismissal of the entire cabinet.
While Moody’s has already downgraded Kenya’s debt status, S&P has opted for a more measured response. Filocca emphasized the importance of gaining clarity on key fiscal matters, including the Appropriation Bill and the Finance Bill, before making a decision.
Moody’s recent downgrade shifted Kenya from a B3 rating, indicating speculative obligations, to a Caa1 rating, which signifies very high credit risk. This change was attributed to the government’s failure to implement fiscal measures necessary to reduce default risks.
The dual downgrades from top credit rating agencies place Kenya in a precarious position regarding budget funding for the current financial year. Following widespread protests, President William Ruto rejected funding measures proposed in the now-scrapped Finance Bill for 2024, prompting a projected budget cut of 1.9% to compensate for lost revenue.
Despite plans to reduce overall borrowing by 50% by 2027, Ruto has stated that borrowing remains necessary to meet budgetary demands, with total public debt estimated at Sh11.3 trillion—over half of the government’s ordinary revenue.
Economist Patrick Pkomu noted that these downgrades create significant challenges, leading to either limited credit options or increased interest rates. The situation may worsen if public discontent forces the government to abandon its agreement with the IMF.
Ravi Bhatia, S&P’s top regional analyst, indicated that while the review process might face delays, the international lender is unlikely to abandon its assessment, given Kenya’s strained financial situation.
The ongoing criticism of international credit rating reviews continues to resonate in Kenya, with many stakeholders advocating for more equitable evaluation practices. Recent sentiments expressed on social media suggest that the ratings reflect systemic biases in the global financial system, urging credit agencies to clarify the criteria used to assess the creditworthiness of nations in the Global South.