Moody’s has upgraded Kenya’s sovereign credit rating to B3, the highest level since July 2023, citing a decline in near-term default risk and improvements in external liquidity, foreign-exchange buffers and market access.
The global ratings agency raised the rating from Caa1 to B3, six notches below investment grade, while revising the outlook to stable from positive, it said on Tuesday.
“The upgrade to B3 reflects our view that Kenya’s near-term default risk has declined,” Moody’s said. “External liquidity has strengthened, reflected in higher foreign-exchange reserves, a narrower current-account deficit and a more stable exchange rate.”
The upgrade comes as East Africa’s largest economy prepares another Eurobond issuance, with plans to raise as much as $2 billion, following a series of liability-management operations that have eased immediate external repayment pressures.
Moody’s said Kenya has strengthened its foreign-exchange reserves, narrowed its current-account deficit and stabilised the shilling, while proceeds from recent foreign-currency bond sales have been used to lengthen the maturity profile of public debt. Improved access to the domestic market has also enabled the government to fund budget needs locally, reducing reliance on external borrowing.
The American based agency cut the country’s rating in 2024 after the government abandoned proposed tax increases following deadly protests, which constrained revenue mobilisation and complicated fiscal consolidation efforts.
Other rating agencies have taken a more cautious stance. Fitch Ratings last week affirmed Kenya at B- with a stable outlook, while S&P Global Ratings upgraded the country to B from B- in August, also assigning a stable outlook.
Despite the upgrade, Moody’s said Kenya’s credit profile remains constrained by weak debt affordability and limited progress on fiscal consolidation, reflecting high domestic borrowing costs as well as political and social pressures that complicate durable deficit reduction.
The agency expects its fiscal deficit to remain close to six percent of gross domestic product, with public debt hovering around 67 percent of GDP.
Moody’s also flagged risks from Kenya’s external debt profile, noting that annual external principal repayments of up to $3 billion over the rest of the decade leave the sovereign vulnerable to shifts in global investor sentiment.
“Looking ahead, sustaining market access and pursuing further liability management, when market conditions allow, will remain important given the still sizeable external amortisation schedule,” the agency said.
