S&P Revises Kenya Sovereign Credit Outlook to Stable From Negative

Standard & Poor Financial Services LLC has revised Kenya’s sovereign credit outlook up to stable rating b+ from negative.

“We affirmed our ‘B+/B’ long-  and short-term foreign and local currency sovereign credit ratings on Kenya,” read a statement from S &P.

Some of the reasons cited include:

• Kenya’s economic growth performance and prospects remain strong, and both fiscal and external performance has improved recently.
• The elevated risks seen toward the end of 2015, including the government’s then very tight liquidity position, have eased.

S & P notes that the stable outlook reflects their expectation that over the next year strong growth prospects and more benign government financing conditions will facilitate fiscal consolidation and contain increases in external indebtedness.

“We expect Kenya will continue to post strong growth over our forecast horizon through 2019, reflecting a relatively well diversified economic base and a strong private sector with increasing regional importance.”

“Kenya’s growth expectations and potential remain strong, on average at around 6% per year over 2016-2019.”

However, they cited that Kenya’s history of ethnic tensions, low GDP per capita, high government debt, and susceptibility to  balance-of-payments pressures  continue to constrain their ratings for the country.

In general, S&P says:

We could lower the ratings if Kenya’s budget deficits were to increase further or government debt increased more than we currently expect. We could also  lower the ratings if political tensions flared up and undermined stability-oriented economic policy making, or if Kenya’s external liquidity or financial conditions markedly deteriorated and led to a significant loss of
foreign-exchange reserves and widening of the external financing gap.

We could raise the ratings if we see prospects for sustained political and economic stability, including declining budgetary imbalances, supported particularly by expenditure control, alongside a sustained improvement in Kenya’s external accounts.

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