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Oct. 04, 2017, 12:15 am
By VICTOR AMADALA @itsamadala
Global credit rating firm Moody's has placed Kenya's B1 long-term issuer rating on review for downgrade, exposing the country's high credit risk profile.
This means that Kenya's creditworthiness may be lowered to B2, hindering the country's ability to secure loans from international fund organizations.
According to Moody's, the decision to place the rating on review for downgrade was prompted by a mixture of negative microeconomics currently affecting the country including high debt burden, government's liquidity pressure, tense political situation and uncertainties over the future direction of its economic and fiscal policy.
The rating agency expects that Kenya's debt burden, which has risen to 56.4 per cent of GDP in June 2017, up from 40.5 per cent five years ago, will continue to rise due to persistently high primary deficits and borrowing costs.
It is forecasting a further upward trajectory in government debt which will see debt-to-GDP surpass the 60 per cent mark by June 2018 unless a decisive policy response is introduced.
Indeed, figures from the Central Bank of Kenya shows that Kenya's public debt moved from Sh3.82 trillion in December 2016 to Sh4.4 trillion in August this year, meaning the state is borrowing Sh86 billion a month on average.
Latest Treasury data from the 2017 budget outlook and review paper shows that the country spent Sh271.3 billion in interest payments, of which Sh212.9 billion went towards domestic debt interest and Sh58.4 billion in external debt interest payments.
The government spent 19 per cent of its revenues on interest payments, up from 10.7 per cent five years ago.
Furthermore, Moody's is concerned by Kenya's increasingly large financing need, risking pressure on government liquidity.
The rating agency argues that pressure on the government primary balance, which posted a deficit of 5.3 per cent of GDP in the last financial year, come from elevated development spending and weak revenue performance.
Moody's rating has two categories, rating economies with minimal credit risk at Aaa, B as high risk while those in default are rated at C.
Moody's threat to downgrade Kenya is coming just a day after S&P affirmed the country's rating at B+/B, indicating a stable outlook.
S&P said Kenya's stable outlook reflects expectation that strong growth prospects will facilitate fiscal consolidation and contain increases in external debt over next year.
It expects Kenya's current account deficits in 2017 and 2018 to reach 6 per cent of GDP before moderating toward 5 per cent in 2019 and 2020.
"Lend to Kenya at your own risk", Moody's rating agency cautions
By VICTOR AMADALA @itsamadala
Global credit rating firm Moody's has placed Kenya's B1 long-term issuer rating on review for downgrade, exposing the country's high credit risk profile.
This means that Kenya's creditworthiness may be lowered to B2, hindering the country's ability to secure loans from international fund organizations.
According to Moody's, the decision to place the rating on review for downgrade was prompted by a mixture of negative microeconomics currently affecting the country including high debt burden, government's liquidity pressure, tense political situation and uncertainties over the future direction of its economic and fiscal policy.
The rating agency expects that Kenya's debt burden, which has risen to 56.4 per cent of GDP in June 2017, up from 40.5 per cent five years ago, will continue to rise due to persistently high primary deficits and borrowing costs.
It is forecasting a further upward trajectory in government debt which will see debt-to-GDP surpass the 60 per cent mark by June 2018 unless a decisive policy response is introduced.
Indeed, figures from the Central Bank of Kenya shows that Kenya's public debt moved from Sh3.82 trillion in December 2016 to Sh4.4 trillion in August this year, meaning the state is borrowing Sh86 billion a month on average.
Latest Treasury data from the 2017 budget outlook and review paper shows that the country spent Sh271.3 billion in interest payments, of which Sh212.9 billion went towards domestic debt interest and Sh58.4 billion in external debt interest payments.
The government spent 19 per cent of its revenues on interest payments, up from 10.7 per cent five years ago.
Furthermore, Moody's is concerned by Kenya's increasingly large financing need, risking pressure on government liquidity.
The rating agency argues that pressure on the government primary balance, which posted a deficit of 5.3 per cent of GDP in the last financial year, come from elevated development spending and weak revenue performance.
Moody's rating has two categories, rating economies with minimal credit risk at Aaa, B as high risk while those in default are rated at C.
Moody's threat to downgrade Kenya is coming just a day after S&P affirmed the country's rating at B+/B, indicating a stable outlook.
S&P said Kenya's stable outlook reflects expectation that strong growth prospects will facilitate fiscal consolidation and contain increases in external debt over next year.
It expects Kenya's current account deficits in 2017 and 2018 to reach 6 per cent of GDP before moderating toward 5 per cent in 2019 and 2020.
"Lend to Kenya at your own risk", Moody's rating agency cautions
