Fitch ratings have affirmed Kenya’s long-term foreign-currency issuer default rating at ‘b+’ with a stable outlook.
The ‘b+’ rating reflects Kenya’s high public and external debt levels and the uncertain pace of fiscal adjustment balanced against a strong and stable growth outlook.
According to Fitch ratings, Kenya’s public finances are a rating weakness while its track record of macroeconomic stability is a support for the rating. A combination of structural and administrative issues has caused revenue/GDP to stagnate in recent years.
While the rating firm expects that Kenya will achieve modest deficit reduction in the next two fiscal years, public budgeting deficiencies and an inconsistent forecasting record mean that the pace of current expenditure is uncertain.
Further, high debt servicing costs will put pressure on spending. The government’s interest costs are 22.1% of revenue, which is twice the ‘b’ median.
Fitch forecasts Kenya’s GDP growth to slow to 5.6% in 2019 from 6.3% in 2018.
The rating firm however says Kenya has exhibited lower growth volatility than peers, with GDP growth between 4.6% and 6.3% and single-digit inflation since 2012.
Medium-term growth prospects are favourable, supported by an improving business environment and infrastructure investment.