Fitch Ratings’ negative outlook on Kenya’s sovereign debt could be withdrawn if a re-run presidential election goes “relatively” smoothly and debt to GDP levels fall, the firm said Thursday.
Fitch currently rates Kenya at B+ with a negative outlook, and this has not been altered since the decision by the Supreme Court to nullify the presidential election, citing irregularities.
A new election has been scheduled for October 17. It means voters will again have to choose between President Uhuru Kenyatta, 55, and veteran opposition leader Raila Odinga, 72.
“If the second election goes relatively smoothly and ... if they achieve a decline in their debt to GDP levels it could lead to a withdrawal of the negative outlook,” said Jan Friederich, Fitch analyst for the Middle East and Africa.
There have been concerns the prolonged uncertainty and inertia in policy will slow down growth and hurt targeted Sh1.7 trillion in revenue collection this financial year, expanding the budget deficit.
Economists at Citi Research have said the country’s Sh524.6 billion fiscal deficit this financial year, although fundable, is the main weakness in the economy and needs to be tamed through budget cuts.
The deficit is to be bridged through Sh268.6 billion in domestic borrowing and Sh256 billion in foreign funds.