Standard & Poor’s upholds Kenya credit ratings

Global credit rating agency Standard & Poor’s has affirmed Kenya’s short- and long-term foreign and local currency sovereign credit ratings at “B+/B” with a stable outlook, based on strong external position and monetary policy flexibility.

The ratings agency says the country enjoys monetary and fiscal flexibility and a resilient economy that offsets the risk of high external debt.

“The ratings on Kenya are supported by its monetary flexibility, liquid domestic financial markets and per capita GDP growth as well as an increasingly diversified economic base,” said S&P in new outlook on Kenya.

Analysts have lately raised concern over the growing debt pile although official economic growth figures have been fairly stable. Good rating is crucial in getting good international loan rates.

Despite the positive view of growth, S&P said the economy remains at risk from upcoming elections, drought, and decelerating credit growth.

The ratings agency said the factors pose short-term risk to Kenya’s 2017 economic growth and budgetary performance.

The Kenyan economy is projected to grow at 5.9 per cent in 2017, the same rate achieved in 2016. But it might fall slightly due to a slowdown in economic activity within the private sector over the prevailing drought, according to the Treasury.

Inflation has also hit a 57-month high due to rising food prices that have pushed the rate further outside the government’s preferred ceiling, raising the probability of decelerated growth.

Official data shows that inflation hit 10.28 per cent in March, up from 9.04 per cent the previous month.

The economy ordinarily takes a dip every five years as businesses hold back investments awaiting the outcome of the elections.