S&P Upgrades Kenya's Credit Rating to B on Easing Liquidity Pressures
- S&P Global Ratings has upgraded Kenya’s credit rating from B- to B with a stable outlook
- The Treasury said the stronger rating will reduce borrowing costs, attract more investment, and create jobs
- Daniel Kathali, an economist, opined that the improved rating will enhance Kenya’s bargaining power with lenders
Elijah Ntongai, an editor at TUKO.co.ke, has over four years of financial, business, and technology research and reporting experience, providing insights into Kenyan, African, and global trends.
Kenya has received a boost to its economic outlook after global ratings agency S&P Global Ratings upgraded the country’s credit rating from B- to B with a stable outlook.
Source: Twitter
According to the National Treasury, the upgrade reflects growing confidence in Kenya’s economic reforms and financial management.
A credit rating works like a financial “report card” for countries, indicating how safe it is for global lenders and investors to commit funds or lend to a country.
Therefore, a stronger rating signals to the world that Kenya is more stable and trustworthy, improving its attractiveness as an investment destination.
S&P cited several reasons behind the upgrade, including government efforts to strengthen the economy through increased exports, diaspora inflows that have bolstered foreign exchange and built up sufficient forex reserves, reforms in debt management, fiscal discipline, and e-procurement.
How will Kenya benefit from an upgraded credit score?
The Treasury noted that the upgrade is expected to bring tangible benefits for Kenya, such as reduced perceived risk, which can lead to lower borrowing costs for the government and the private sector.
This, in turn, could translate into more job opportunities, stronger business growth, and increased investor inflows.
Speaking to TUKO.co.ke, Daniel Kathali, an economist, explained that the higher credit rating will reduce the interest rates on Kenya's borrowing in the international market.
"Debt-servicing cost and the high interest rate are a big problem for Kenya. An improved credit rating means reduced borrowing costs, as it bolsters Kenya’s bargaining power in future negotiations with multilateral lenders and bilateral partners. This will allow the country to secure more favorable financing terms for infrastructure. It also sends a strong signal about the outlook for Kenya's macroeconomic stability, which is good to attract foreign direct investments," Kathali explained.
Why was Kenya's credit rating downgraded?
In 2024, the same credit rating organisation downgraded Kenya's credit rating to B-, citing the repeal of the 2024/2025 Finance Bill, which it said would slow fiscal consolidation.
President William Ruto withdrew the bill, containing tax hikes worth KSh 346 billion ($2.69 billion), after nationwide protests that left more than 50 people dead.
S&P warned that the downgrade reflected its view that Kenya’s medium-term fiscal and debt outlook will worsen following the government’s decision to scrap all proposed tax measures under the bill.
Source: Twitter
Kenya secures loan from Japan
In other news, President William Ruto secured a KSh 22 billion loan from Japan during the ninth Tokyo International Conference on African Development (TICAD 9).
Prime Cabinet Secretary Musalia Mudavadi and Nippon Export and Investment Insurance CEO Atsuo Kuroda signed the deal in the presence of Japanese Prime Minister Shigeru Ishiba.
The funds, provided through Samurai bonds, will be used to expand Kenya’s energy and vehicle assembly industries, promote electric car production, strengthen electricity transmission, and create jobs.
According to Mudavadi, the financing will enhance fiscal stability and reduce power costs, while Bloomberg reported that the NEXI-backed loan structure is designed to lower sovereign borrowing expenses.
Source: TUKO.co.ke
