S&P Global Ratings rates Kenya as ‘negative’

Thursday, July 16th, 2020 00:00 |
Central Bank of Kenya. Photo/PD/File

Lewis Njoka @LewisNjoka

Kenya’s credit ratings have been revised by S&P Global Ratings designating the country’s outlook as ‘negative’ from ‘stable’, saying  the coronavirus pandemic will slow growth significantly and weigh on its already weak public finances.

In an announcement made Tuesday, the rating agency said it also foresees Kenya’s external debt rising sharply this year, warning that it may remain high for the next three years.

Kenya’s debt currently stands at Sh6.5 trillion with analysts and Central Bank of Kenya having warned that the country might be have hit headroom.

“Although external financial support, including from the International Monetary Fund (IMF), will help fund Kenya’s twin fiscal and external deficits in 2020, external debt will rise sharply in 2020 and remain high in 2020-2023,” the ratings agency said in a statement. 

Rating agencies usually assess credit risk of specific debt securities and the borrowing entities to provide an independent evaluation of the creditworthiness of debt securities issued by governments and corporations.

When one of the three major credit-rating agencies designates a negative watch. The negative economic effect of the pandemic shock will drive real gross domestic product (GDP) down to one per cent in 2020, followed by a rebound to 4 per cent in 2021.

S&P’s adjustment follows in the footsteps of Fitch and Moody’s which revised the country’s sovereign credit rating outlook to negative in the month of June and May respectively. 

Fitch and Moody’s

On June 19 Fitch revised Kenya’s credit rating to B+ with a negative rating while Moody’s revised it to B2 with a negative outlook in the preceding month of May.

The downgrade in external loan profile could further hurt the country’s plans to borrow over Sh340 billion to plunge its huge budget deficit.

To fill a deficit in its Sh2.79 trillion expenditure budget for the 2020/21 financial year, Kenya plans to borrow Sh840.6 billion, Sh494 billion locally and Sh347 billion externally.

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