It is a beautiful New Year present for Kenyan business and government as the Moody’s ratings changes the country’s outlook from negative to positive in the latest ratings released yesterday.
The positive change of the Government of Kenya is good news to the country’s bill of health as a creditworthy economy showing great signs of recovery with lower inflation, lower energy costs and most importantly timely debt obligation payments.
Moody’s Ratings
“The change in outlook to positive is driven by the increasing likelihood of Kenya’s liquidity risks easing and debt affordability over time.”
The report indicates that Kenya’s domestic financing costs have started to decline amid monetary easing and could continue to do so if the government sustains its more effective management of social demand and fiscal consolidation.
Whilst in the past Kenya has struggled to expand revenue significantly and durably, revenue collection efforts if successful, present potential for further improvements in debt affordability.
Moody’s has stated that supporting Kenya’s ratings are crucial credit strengths including a large, diversified economy that has shown resilience to shocks and benefits from a relatively developed capital and credit markets.
Consequently, this enables the government to issue long-term domestic debt in local currency.
Some of the considerations for rating Keya more favourably by Moody’s include improved domestic financing conditions and fiscal consolidation measures showing sing of success.
Others included engendering investor confidence that tangibly lowers liquidity risks and enhancing debt affordability as well as placing Kenya’s debt burden on a durable downward trajectory.
Yet the rating. Though better has great room for improvement.
The affirmation of Kenya’s Caa1 rating reflects still elevated credit risks by very weak debt affordability and high gross financing needs relative to funding options.
Fiscal policy effectiveness might be limited institutions that still need strengthening, policy unpredictability and high corruption levels, hindering revenue collection, said the Moddy’s Rating report.
Notably the report was based on figures when the Per Capita Income stood at USD 6,772, Real GDP growth rate at 5.8 per cent, Inflation Rate at 6.6 per cent and External Debt to GDP at 70.5 per cent
President William Ruto has initiated better fiscal management including all government revenues paid through the one and centered E-Citizen platform reducing pilferage in the income stream.
“President William Ruto took over when the economy was struggling. The economy has stabilized and we will roll out new development projects and complete the installed ones,” said the Deputy President Prof Kindiki Kithure at a public function last week.
During a recent IMF meeting in Washington DC, Treasury CS John Mbadi acknowledged the economic challenges that have plagued the country, including inflation, currency depreciation, and rising public debt.
However, he was bullish about Kenya’s recovery trajectory, noting significant interventions initiated by President William Ruto’s administration.
“Kenya is on the path to recovery,” Mbadi declared, highlighting the administration’s commitment to fiscal consolidation and economic recovery.
Moody’s ratings indicate the creditworthiness of a country or company.
Since John Moody devised the first bond ratings almost a century ago, Moody’s rating systems have evolved in response to the increasing depth and breadth of the global capital markets.
Much of the innovation in Moody’s rating system is a response to market needs for clarity around the components of credit risk or to demands for finer distinctions in rating classifications.
From the original 1909 bond rating definitions, Moody’s ratings have expanded to the extent
that today it maintain 32 systems, with the number growing every year.
