Kenya: Worrying Cold Headwinds

Kenya: Worrying Cold Headwinds

Fitch announced it had put Kenya’s credit rating on a negative outlook from stable, signalling a possible downgrade over the next one to two years if the debt situation deteriorates.

Kenyan bonds, which broke records in June 2014 by being the largest début by an African country when it raised US$2.75 billion from international investors, have lost more money for dollar investors than any other emerging market sovereign bond. In the first quarter of this year the economy grew by 4.9 per cent, below expectations for the country.

Fitch Ratings has revised the outlook on Kenya’s long-term foreign and local currency issuer default ratings (IDR) to negative from stable and affirmed them at ‘B+’ and ‘BB-’, respectively.

Kenya’s public finances have been on a steadily deteriorating trend since 2008, reflecting weak revenue performance, increasing infrastructure spending, and persistently high current expenditure.

The government last year raised $2.75 billion (Sh280 billion) by selling dollar-denominated sovereign bonds to global investors and looks to go back to the international debt market to finance a growing budget deficit. Exports are struggling, the tourism industry is weak, concerns over insecurity seems likely to stymie economic activity for many years, and imports show no sign of slowing down at a time when the shilling is in trouble. If that was not enough corruption real and perceived continues to plague the country.