Capital Markets

Fitch says Kenya debt poses threat to outlook

fitch

Fitch says although Kenya has been cutting back on its budget deficit — expected to come in at 7.1 per cent this fiscal year against the original budget target of 9.7 per cent — the consolidation is likely to face headwinds. PHOTO | AFP

International ratings agency Fitch has maintained its long-term rating on Kenya’s foreign and local currency  at ‘B+’ but with a negative outlook, citing concerns over the country’s fiscal deficit and public debt.

The issue ratings on Kenya’s senior unsecured foreign-currency bonds have also been affirmed at ‘B+’.

Fitch says although Kenya has been cutting back on its budget deficit — expected to come in at 7.1 per cent this fiscal year against the original budget target of 9.7 per cent — the consolidation is likely to face headwinds, notably from underperforming revenues coupled with increased current expenditures around the August 2017 General Election.

“Kenya’s ratings are supported by its strong growth potential and resilience to shocks, favourable business climate and only moderate exposure to commodity prices. However, its ratings are constrained by its low GDP per capita, sizeable twin budget and current account deficits and rising public and external debt ratios, as well as by political risks,” said Fitch in a statement.

The agency also warns that the rising price of oil brings the risk of widening the current account deficit in 2017 and 2018.

The deficit this year shrunk on the back of lower crude prices and a reducing capital goods import bill.

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