Agency retains Kenya on stable outlook rating after poll

Rating agency Fitch has maintained Kenya’s ‘B+’ or stable outlook rating following a peaceful General Election, but cautioned the political risk is still present.

The news is a relief for the next government, which is eyeing a $1 billion (Sh86 billion) foreign bond next fiscal year.

After the elections last Monday, Fitch said the winner of the presidential race would take time to settle in before the real work of making business-friendly laws could begin.

But this is a tall order since no coalition won an outright majority in Parliament.

The two leading coalitions Jubilee and Cord have 135 MPs and 117 MPs respectively. Amani coalition has 18 MPs, Eagle Alliance two while other parties share 18 seats.

“Irrespective of who ultimately wins the presidency, neither candidate’s coalition has a majority in Parliament. This could make passing legislation time-consuming and dependent on consensus among a disparate group of parties,” said Fitch Ratings.

The Independent Electoral and Boundaries Commission declared Jubilee candidate Uhuru Kenyatta the winner but Cord candidate Raila Odinga has disputed the results, opting to go to the courts.

READ: President-elect Uhuru faces a crowded business agenda

Fitch adds that should Mr Kenyatta become President, a slow pace of trials at the International Criminal Court could slow the rate of making laws and further dent investor confidence.

“A protracted trial will likely see the reform agenda stagnate further; Kenya has already fallen 43 places to 121st in the World Bank’s Doing Business Survey since the 2008 elections, with adverse implications for FDI, which lags regional peers,” said the rating agency.

Kenya needs a good rating in light of the Treasury’s announcement that it is planning to issue the sovereign bond in the second half of the year.

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Finance minister Njeru Githae said that the government would issue the international bond with proceeds used to re-pay the $600 million two-year syndicated loan that the government borrowed from a consortium of 13 banks in August 2012.

Analysts said that the weakening shilling and falling reserves make the case for a sovereign bond.

READ: Forex reserves down to one-year low

“The need for Kenya to issue an international bond has become important after a steep fall in its currency against the dollar and a surge in interest rates in 2011/12 which exposed the need for the country to have adequate hard currency reserves and alternative affordable borrowings,” said a report by Standard Investment Bank.

Reserves at the Central Bank of Kenya can only cover imports worth 3.75 months, the lowest level since March 2012.