Global credit ratings agency Fitch Ratings has reaffirmed Kenya’s sovereign credit rating at ‘B-’ with a stable outlook, signaling both cautious confidence and deep-seated economic vulnerabilities as the East African nation navigates mounting public debt and fiscal pressures.
Fitch’s decision means Kenya remains in non-investment grade territory, often described as “speculative” or “junk” status, reflecting the credit risk for international lenders and investors.
While this may reassure markets about near-term external financing, it also highlights the limits to Kenya’s borrowing costs and access to capital.
In its assessment, Fitch pointed to several positive macroeconomic developments that have strengthened Kenya’s external position.
Gross foreign exchange reserves increased to an estimated US$12.4 billion by the end of 2025, supported by export earnings, tourism receipts, remittances, and strategic foreign exchange purchases by the Central Bank of Kenya.
The agency estimates these reserves will provide coverage for roughly four months of external payments in 2026, a level that helps mitigate short-term liquidity risks.
The Kenyan government’s proactive liability management was also highlighted. Measures such as the refinancing of US dollar-denominated Eurobonds due in 2027 and 2028, and the conversion of some debt to cheaper renminbi obligations, have reduced near-term external financing pressures.
Fitch noted that Kenya’s medium-term economic growth prospects, a relatively diversified economy compared with many peers, and the build-up of official reserves supported its decision to maintain the rating.
Despite these positive developments, Fitch sounded a clear warning on Kenya’s fiscal and structural weaknesses.
The agency projects the government’s fiscal deficit will widen to 5.8% of GDP in the 2025/26 financial year, significantly above the government’s own target and the median for ‘B’-rated sovereigns globally.
Rising debt servicing costs, drought-related expenditure, and increased social and security spending ahead of the 2027 general elections are expected to strain government finances, complicating efforts to consolidate the budget.
Fitch forecasts government interest payments will remain high relative to revenue, with an interest-to-revenue ratio above 30%, more than double the median for similarly rated sovereigns.
Kenya’s overall public and publicly guaranteed debt remained high at 67.8% of GDP by mid-2025, according to the National Treasury, and is projected to stay above the 55% benchmark until at least 2029.
Fitch echoed concerns about the country’s debt sustainability, noting the persistent risk of debt distress despite efforts to manage liabilities.
Fitch also warned that Kenya’s external financing needs will remain elevated, with external debt service projected to rise to about US$5.3 billion (3.7% of GDP) in the financial year ending June 2026, before declining and then rising again after 2028.
This persistent demand for funds underlines Kenya’s vulnerability to external market conditions.
Governance challenges factored into the rating decision as well. Fitch assigned Kenya an ESG Relevance Score of 5, indicating weak institutional capacity, uneven application of the rule of law, and corruption risks, all of which can weigh heavily on investor confidence and creditworthiness.
The reaffirmation of Kenya’s sovereign credit rating comes at a politically sensitive juncture, with the country preparing for general elections in 2027.
National Treasury officials have previously warned that a downgrade by global rating agencies could sharply increase borrowing costs and destabilize financial markets. The stable outlook from Fitch, therefore, is a relative relief for policymakers.
Investors will now be watching other major rating agencies closely.
In August 2025, S&P Global Ratings upgraded Kenya’s long-term sovereign credit rating from ‘B-’ to ‘B’, citing improved external liquidity and stronger reserves, a step that Fitch did not mirror but which suggests diverging assessments among credit evaluators.
For Kenya, the affirmation of its sovereign credit rating at ‘B- with a stable outlook’ has significant implications.
While it reinforces confidence in the near-term economic trajectory, the persistent non-investment grade rating means the cost of borrowing on international markets remains high.
This can affect infrastructure financing, private-sector investment, and the broader economic development agenda.
Economists say the key to future rating improvements lies in stronger fiscal consolidation, deeper structural reforms to broaden the revenue base, and improved governance to bolster investor confidence.
Without progress on these fronts, the nation could remain vulnerable to shocks in global financial markets.
As Kenya balances the twin demands of sustaining growth and managing debt obligations, Fitch’s assessment highlights both resilience and fragility in the country’s economic architecture, a duality that will shape policy debates in Nairobi and investor corridors worldwide.
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