Moody’s Ratings upgraded Kenya’s sovereign rating to B3 from Caa1 on January 27, citing a sharp reduction in near-term default risk.
This, according to the American-based rating agency, followed stronger foreign exchange reserves, successful Eurobond refinancing, and improved access to both external and domestic funding markets.
The upgrade applies to Kenya’s long-term local and foreign currency issuer ratings as well as its foreign currency senior unsecured debt.
Moody’s revised the outlook to stable from positive, noting that while liquidity pressures have eased, weak debt affordability and persistent fiscal deficits still limit the rating.
The agency pointed to improvements in Kenya’s external position, with foreign exchange reserves rising to about Ksh.1.57 trillion ($12.2 billion) by the end of 2025, equal to 5.3 months of import cover, up from $9.2 billion a year earlier.
The current account deficit narrowed to 1.3 percent of GDP in 2024, supported by higher remittances, stronger services earnings and improved exports.
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Although the deficit is expected to widen toward 3 percent of GDP, Moody’s believes existing buffers are sufficient to handle upcoming external debt maturities.
However, with about half of public debt denominated in foreign currency, Kenya remains exposed to exchange rate movements.
Debt management operations also helped ease refinancing pressure, pointing to last year 2025 when Kenya issued $3 billion in Eurobonds and used part of the proceeds to buy back bonds maturing between 2026 and 2028.
This, according to Moody’s, effectively pushes the next large Eurobond maturity to 2030. Even so, annual external repayments of between $2.5 and 3 billion over the rest of the decade mean Kenya’s credit profile remains sensitive to shifts in investor sentiment.
Fitch Ratings, which recently affirmed Kenya at B- with a stable outlook, broadly agreed that liquidity conditions have improved. Fitch estimated foreign exchange reserves at $12.4 billion at the end of 2025 and noted additional support from the partial refinancing of upcoming Eurobonds and the conversion of some Chinese debt into renminbi, which is expected to generate modest savings.
However, Fitch stopped short of an upgrade, citing rising debt service costs and fiscal slippage.
