S&P Global Ratings has raised Kenya’s long-term sovereign credit rating to ‘B’ from ‘B-’ and assigned a stable outlook, citing reduced external liquidity risks and resilient economic growth despite persistent fiscal pressures.
The global credit agency said on Friday that the stable outlook “reflects our expectation that Kenya’s robust economic growth and reduced immediate external liquidity risks will help offset pressures stemming from high interest costs and a protracted fiscal consolidation process.”
It warned, however, that renewed pressure on reserves or distressed debt operations could trigger a downgrade, while clear evidence of fiscal discipline and lower borrowing costs would support further upgrades.
According to S&P, stronger export earnings—particularly from coffee—together with sustained diaspora remittances have bolstered foreign exchange reserves and narrowed the current account deficit to 1.3% of GDP in 2024, from 2.6% in 2023. Reserves climbed to a record $11.2 billion in July 2025, nearly double the $6.6 billion held as of 2023.
Debt liability management has also eased external financing risks. Kenya’s $1.5 billion Eurobond issuance in February, paired with a partial buyback of the 2027 notes, cut near-term repayments to just $108 million annually through 2027.
External amortisations are projected at $2.7 billion in 2026 and $3.8 billion in 2027—levels S&P described as “manageable.”
Monetary easing has further supported liquidity. The Central Bank of Kenya cut rates by 350 basis points to 9.50%—the lowest since May 2023—driving T-bill yields down to 8% in July from a 16% peak a year earlier, reducing borrowing costs and opening space for private-sector credit, though banks remain wary given elevated non-performing loans.
Despite these improvements, fiscal risks remain entrenched. Kenya’s budget deficit is forecast at 5.5% of GDP in 2026, while interest payments consume roughly a third of government revenue—among the heaviest burdens in S&P’s sovereign coverage.
The withdrawal of International Monetary Fund concessional funding earlier this year has also pushed Nairobi toward more expensive borrowing, including a $500 million UAE loan priced at 8.25%.
