- Kenya’s credit rating is constrained by weak government finances and rising debt levels, Moody’s Investors Service said.
Growth in East Africa’s biggest economy is significantly below potential and that of its peers, restricting the outlook for the B1 rating, Moody’s said in a report dated on June 14 and e-mailed today.
“Kenya’s B1 rating reflects the country’s weak public-sector balance sheet, which is characterised by rising deficit and debt levels,” Moody’s said. “Moreover, its history of political instability, high corruption levels and limited capacity to execute reforms exacerbate risks stemming from its volatile economic fundamentals.”
The government last week forecast a budget deficit of 7.9 percent of gross domestic product in the year through June 2014. The shortfall, including grants, is estimated at 6.7 percent this year, according to the Finance Ministry’s website. The nation plans to sell its first Eurobond by the end of September to help finance the shortfall and invest in transport and energy projects.
Standard & Poor’s and Fitch Ratings have a B+ rating on Kenyan debt, the equivalent of Moody’s. That’s four levels below investment-grade and on par with Zambia and Cape Verde.
Economic growth is estimated to reach about 5 percent to 6 percent through 2015, Moody’s said. The economy expanded 4.6 percent last year and is forecast by the government to grow 5.8 percent in 2013.
The economy hasn’t recovered to the 7 percent expansion reached in 2007 after a disputed presidential election at the end of that year sparked two months of ethnic clashes that left more than 1,100 people dead. The turmoil triggered an immediate plunge in the stock market and currency and cut economic growth to 1.5 percent in 2008.
In March, Uhuru Kenyatta was elected president and pledged to accelerate growth to at least 10 percent, create a million jobs a year and elevate the country to middle-income status within a generation. Kenya is the world’s biggest exporter of black tea and it supplies a third of all flowers traded in Europe.
“Economic growth prospects are improving but limited economic diversification, a narrow export base and low per-capita income continue to constrain the rating,” Moody’s said.