Agency now warns of Kenya’s rating threat from locust invasion

The invasion of Kenya by locusts could reduce the international creditworthiness of the country with a decline in agricultural production, credit rating agency Moody’s says.

In a new report, the agency said that infestation of desert locusts was a negative not only for Kenya but also for other countries in eastern African including Ethiopia and Somalia.

A credit negative assessment means there remains potential for the credit rating to fall and future loans to be more costly and difficult to get.

Kenya creditworthiness stands at B2, having fallen a notch (from B1) in early 2018 on account of high public debt, fiscal deficits and weak institutions.

“The locust infestation is credit negative for agriculture-dependent countries, particularly Ethiopia, Kenya and Somalia, which have so far been most affected (the latter declaring a national emergency). Rain over the next six months could compound the crisis given the locusts' sheer numbers and voracious appetite for important crops,” says Moody’s.

Agriculture contributes at least 25 percent of Kenya’s GDP, but this has in some years risen to 30 percent.

The rating agency noted that agriculture contributed an even bigger part of the gross domestic product (GDP) for Somalia and Ethiopia as compared to Kenya — meaning that they were even more exposed to the vagaries of the insects.

Agriculture contributes around one-third of GDP in East Africa and is responsible for more than 65 per cent of employment in all East African countries with the exception of Kenya, Moody’s said, meaning the infestation is likely to damage more than food security.

The low per capita level in the region make it even more vulnerable, the agency said.