Kenya hits another hurdle with Moody’s credit downgrade

Kenya’s quest to tap international markets for financing took a hit after ratings agency Moody’s downgraded the country’s foreign exchange issuer from B2 to B3.

This means that Kenya is now rated “high credit risk” and just one level above “very high credit risk”.

In its statement, Moody’s cited the government’s increasing liquidity risks as the reason for the downgrade.

“The downgrade is driven by increasing government liquidity risks. Moody’s said that domestic financing conditions have deteriorated significantly over the past two months, with a decline in net domestic issuance contributing to the funding shortfall.

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The government had in the recent past been grappling with a significant undersubscription of bond issues with the cancellation of the 15-year bond auction in mid-April due to reduced investor appetite.

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behind the target

According to the latest data from the National Treasury, revenue from domestic borrowing closed at Sh406.6 billion in April against a target for the full fiscal year (ending in June) of Sh886.5 billion.

This means that just two months before the close of the current fiscal year, domestic borrowing fell short of the target.

The downgrade by Moody’s comes just under a month after the Treasury called for expressions of interest from global banks to underwrite the country’s next Eurobond, which it plans to issue in the 2023/24 fiscal year.

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Kenya’s global and other frontier markets have been closed in the recent past with the government having to postpone a sovereign bond issuance that was planned for the current fiscal year due to high yields.

Rating downgrades are watched closely by global investors and are seen as unfavorable signals for the country’s position.