Fitch Ratings has affirmed Kenya’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook.
The affirmation reflects Kenya’s strong medium-term growth prospects, a diversified economy relative to peers and the build-up of official reserves.
These strengths are balanced against weak governance indicators relative to peers, including risks to social stability and public security, high debt servicing costs and fiscal consolidation constrained by a high level of informality and political and social challenges.
According to the latest data from the Central Bank of Kenya (CBK), Kenya has $12.48 billion (Ksh.1.6 trillion) foreign-exchange (FX) reserves, equivalent to 5.4 months of import cover.
“Strong FX reserves reduce external financing risks,” said Fitch in its latest report and that Kenya’s lability management operations have helped reduce near-term external liquidity risk, but the external debt service burden remains high.
Other Key Rating Drivers
External liquidity pressures have moderated, following Kenya’s partly refinancing the 2028 $1 billion Eurobond in October 2025 and the 2027 $900 million Eurobond in February 2025.
Kenya also converted part of the US dollar debt owed to the Export-Import Bank of China into renminbi-denominated liabilities and renegotiated the terms, saving around 0.1% of GDP per year.
Also Read: Fitch Downgrades Kenya’s Long-Term Foreign-Currency Rating to B-
Fitch estimates that gross FX reserves rose to $12.4 billion at end-2025 on higher portfolio inflows and official loans, strong exports, tourism and remittance inflows and recent central bank FX purchases.
“We project the current account deficit will widen further in 2026 to 2.6% of GDP, from an estimated 2.3% in 2025, driven by higher imports and external interest costs. Together with modest capital inflows, this underpins our forecast that FX reserves will cover four months of current external payments in 2026.”
Government external debt service (amortisation plus interest) after the buybacks of Eurobonds is expected to rise in the financial year ending June 2026 (FY26) to $5.3 billion (3.7% of GDP), from about $5 billion in FY25, before moderating to $4.5 billion (2.9% of GDP) in FY27.
Government external debt service will rise back, above $5 billion in FY28-FY30, keeping gross external financing needs high.
Large Fiscal Deficit
Fitch says it forecasts a FY26 deficit of 5.8% of GDP, above the budget target of 4.7% of GDP and the projected ‘B’ median of 3.5%, following a slippage of 2.6pp above the initial budget target in FY25.
In the first half of the year 2026, Fitch says it estimates that total expenditure exceeded the target by 0.6% of projected FY26 GDP.
And as the country gears up for the 2027 general election, which comes with rising spending commitments, fiscal consolidation efforts will be hampered.
Interest payments will also skyrocket in the interest of the political razzmatazz, drought-related expenses, and higher social and security-related expenses ahead of the 2027 elections.
“In our view, the risk of renewed social unrest will also present challenges to fiscal consolidation.”
