Kenya's Liquidity Pressure Eases Following Early KSh 258b Eurobond Repayment
- Fitch, an international credit rating agency, ranked Kenya's economy in the latest report published in July 2025
- The agency, with its headquarters in London and New York, explained the B-rating it gave to the country
- With the interest-to-revenue ratio expected to rise, debt servicing costs are expected to rise sharply, straining taxpayers
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TUKO.co.ke journalist Japhet Ruto has over eight years of experience in financial, business, and technology reporting and offers deep insights into Kenyan and global economic trends.
Following the early repayment of a $2 billion (KSh 258.5 billion) Eurobond in February 2025, Kenya's external liquidity pressure has eased.
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Fitch, an international credit rating agency, said that the Central Bank's interventions and consistent foreign inflows contributed to the reserves reaching $11.1 billion (KSh 1.43 trillion) by the end of June.
How is Kenya's economy performing?
Kenya's Long-Term Foreign Currency (LTFC) Issuer Default Rating (IDR) was maintained at 'B-' with a stable outlook by Fitch Ratings.
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"Kenya's 'B-' rating reflects strong medium-term growth prospects, a diversified economy and strengthening of the monetary policy framework. Following the government's attempts to fortify the monetary policy framework and the early payment of a $2 billion Eurobond maturity in February 2025, external liquidity concerns have subsided.
Together with increased export and tourism revenues, robust remittances, government loans, and recent foreign exchange purchases by the Central Bank of Kenya (CBK), these initiatives have drawn larger portfolio inflows, bolstered external buffers, and enhanced the value of the currency," it stated.
Why is Kenya's economy at risk?
The agency did, however, caution that weak governance indicators, rising debt costs, and revenue mobilisation constraints continue to be significant risks.
According to Fitch, the budget deficit will fall short of the National Treasury's objective of 4.7% of Gross Domestic Product (GDP) in the 2025/2026 fiscal year (FY) by reaching 5.2%.
It is anticipated that debt servicing expenses will increase dramatically, with the interest-to-revenue ratio rising to 33%, which is far higher than the median of 15% for peers with comparable ratings.
Treasury predictions indicate that while spending is predicted to drop to 22% of GDP in 2025/2026 FY, revenue is expected to increase to 17.5% of GDP during the review period.
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Fitch is still cautious, though, predicting that revenue will only reach 17.2% due to Kenya's shortcomings in public financial management.
"While overall revenue is expected to rise marginally to 17.2% of GDP in FY26, it will still fall short of the government's 17.5% objective and its 'B-' rated peers' 17.7%. Revenue collection continued to underperform in FY25, falling short of both the baseline target by 2.3% of GDP and the supplementary budget III objective by 0.4% of GDP," it added.
What to know about Kenya's economy
- The 2025 Economic Survey showed Kenya's economy grew by KSh 1.2 trillion in 2024.
- The International Monetary Fund (IMF) projected that the country's economy will grow by 4.8% in 2025.
- In 2024, the economy recorded the slowest job growth in five years.
How is the Kenyan shilling performing?
The Central Bank of Kenya observed that the value of the Kenyan shilling against the US dollar remained stable.
On July 24, the local currency was worth KSh 129.26 to the US dollar, while on July 17, it was valued at KSh 129.24.
Commercial banks' excess reserves were KSh 8.7 billion at the time, and the average interbank rate had slightly decreased from 9.64% to 9.62%.
Proofreading by Asher Omondi, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
