President William Ruto’s cash-strapped administration has secured a vital endorsement after the global rating agency S&P upgraded Kenya’s credit rating.
The surprise decision, analysts said, will provide immediate debt-cost relief but falls short of solving fundamental revenue weaknesses and high spending demands.
On Friday, S&P upgraded Kenya’s long-term sovereign credit rating to ‘B’ from ‘B-’, citing “reduced near-term external liquidity risks” driven by what it sees as robust export earnings, strong diaspora remittances, and a successful Eurobond buy-back operation earlier this year.
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The agency maintained a stable outlook, noting expectations that solid economic growth would offset high interest costs and a slow fiscal consolidation process.
The upgrade provides a significant confidence boost for a Treasury that has been facing substantial debt servicing requirements, analysts said.
A sovereign credit rating acts as a global benchmark of a country’s creditworthiness, directly influencing its cost of borrowing in international markets.
A higher rating signals lower risk to investors, allowing a government to secure loans and issue bonds at lower interest rates, thereby reducing its debt servicing costs and freeing up fiscal resources.
In its statement, S&P detailed the improvements, noting that “external data revisions, coupled with strong performances in coffee exports and diaspora remittances, supported a narrowing of Kenya’s current account deficit to 1.3 per cent of the gross domestic product (GDP) in 2024, from 2.6 per cent in 2023.”
The agency highlighted that these improvements “strengthened Kenya’s forex reserves to a record-high $11.2 billion (Sh1.45 trillion) in July 2025, up from $6.6 billion (Sh858 billion) at year-end 2023.”
Furthermore, S&P pointed to Kenya’s successful debt management, stating that the “$1.5 billion (Sh200 billion) Eurobond issuance and concurrent buy-back operation in February 2025 helped lower Eurobond principal repayments to $108 million (Sh14 billion) annually over 2025-2027, from $300 million (Sh45 billion) previously.”
The rating improvement is likely to reduce the premium investors demand to hold Kenyan risk, potentially making future Eurobond issuances and commercial loans less expensive.
S&P projects that “the government’s total external debt amortisations will therefore remain manageable at $2.7 billion (Sh351 billion) in the fiscal year ending June 30, 2026, and at $3.8 billion (Sh494 billion) in fiscal 2027.”
However, the assessment contrasts with Moody’s Investors Service’s evaluation, which places Kenya’s government debt-to-GDP ratio at 66.5 per cent.
While lower than the peak of 72 per cent, the decline has been attributed partly to GDP rebasing rather than aggressive fiscal consolidation.
Debt servicing requirements remain substantial, with interest payments consuming 33 per cent of government revenue.
Over half of the budget is allocated to wages, pensions, interest payments, and county transfers, with development spending reduced to 3.5 per cent of GDP.
Revenue collection continues to present challenges. The Kenya Revenue Authority (KRA) missed its revised fiscal year 2025 target by Sh47.3 billion.
Political opposition to tax increases, demonstrated by protests against the 2024 Finance Bill, has limited options for revenue generation before the 2027 elections.
President Ruto projected this week that economic growth would exceed official forecasts at 5.6 per cent this year. The national debt has increased by Sh2.85 trillion since the Ruto administration took office in 2022.
Future progress is seen as contingent on reforms tied to World Bank and IMF support, including e-procurement and conflict-of-interest legislation, according to Moody’s.
A successful IMF programme could support investor confidence and reduce external borrowing costs, Moody’s reckons.
The S&P upgrade provides near-term financial relief while longer-term fiscal challenges remain, analysts cautioned.
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President William Ruto’s cash-strapped administration has secured a vital endorsement after the global rating agency S&P upgraded Kenya’s credit rating.
The surprise decision, analysts said, will provide immediate debt-cost relief but falls short of solving fundamental revenue weaknesses and high spending demands.
On Friday, S&P upgraded Kenya’s long-term sovereign credit rating to ‘B’ from ‘B-’, citing “reduced near-term external liquidity risks” driven by what it sees as robust export earnings, strong diaspora remittances, and a successful Eurobond buy-back operation earlier this year.
Follow The Standard
channel
on WhatsApp
The agency maintained a stable outlook, noting expectations that solid economic growth would offset high interest costs and a slow fiscal consolidation process.
The upgrade provides a significant confidence boost for a Treasury that has been facing substantial debt servicing requirements, analysts said.
A sovereign credit rating acts as a
global benchmark of a country’s
creditworthiness, directly influencing its cost of borrowing in international markets.
A higher rating signals lower risk to investors, allowing a government to secure loans and issue bonds at lower interest rates, thereby reducing its debt servicing costs and freeing up fiscal resources.
In its statement, S&P detailed the improvements, noting that “external data revisions, coupled with strong performances in coffee exports and diaspora remittances, supported a narrowing of Kenya’s current account deficit to 1.3 per cent of the gross domestic product (GDP) in 2024, from 2.6 per cent in 2023.”
The agency highlighted that these improvements “strengthened Kenya’s forex reserves to a record-high $11.2 billion (Sh1.45 trillion) in July 2025, up from $6.6 billion (Sh858 billion) at year-end 2023.”
Furthermore, S&P pointed to Kenya’s successful debt management, stating that the “$1.5 billion (Sh200 billion) Eurobond issuance and concurrent buy-back operation in February 2025 helped lower Eurobond principal repayments to $108 million (Sh14 billion) annually over 2025-2027, from $300 million (Sh45 billion) previously.”
The rating improvement is likely to reduce the premium investors demand to hold Kenyan risk, potentially making future Eurobond issuances and commercial loans less expensive.
S&P projects that “the government’s total external debt amortisations will therefore remain manageable at $2.7 billion (Sh351 billion) in the fiscal year ending June 30, 2026, and at $3.8 billion (Sh494 billion) in fiscal 2027.”
However, the assessment contrasts with Moody’s Investors Service’s evaluation, which places Kenya’s government debt-to-GDP ratio at 66.5 per cent.
While lower than the peak of 72 per cent, the decline has been attributed partly to GDP rebasing rather than aggressive fiscal consolidation.
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Debt servicing requirements remain substantial, with interest payments consuming 33 per cent of government revenue.
Over half of the budget is allocated to wages, pensions, interest payments, and county transfers, with development spending reduced to 3.5 per cent of GDP.
Revenue collection continues to present challenges.
The Kenya Revenue Authority
(KRA) missed its revised fiscal year 2025 target by Sh47.3 billion.
Political opposition to tax increases, demonstrated by protests against the 2024 Finance Bill, has limited options for revenue generation before the 2027 elections.
President Ruto projected this week that economic growth would exceed official forecasts at 5.6 per cent this year. The national debt has increased by Sh2.85 trillion since the Ruto administration took office in 2022.
Future progress is seen as contingent on reforms tied to World Bank and IMF support, including e-procurement and conflict-of-interest legislation, according to Moody’s.
A successful IMF programme could support investor confidence and reduce external borrowing costs, Moody’s reckons.
The S&P upgrade provides near-term financial relief while longer-term fiscal challenges remain, analysts cautioned.
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By Brian Ngugi