NAIROBI, Kenya, July 28 – Kenya’s exterior liquidity stress has eased following an early reimbursement of a $2 billion Eurobond in February final yr.
International credit standing company Fitch additionally cited regular overseas inflows and the Central Bank’s interventions that helped push reserves to $11.1 billion by the tip of June.
“Kenya’s diversified financial system and coverage reforms have supported a restoration in investor confidence,” Fitch said.
However, the company warned that ‘weak governance indicators, rising debt prices, and income mobilization constraints’ stay key dangers.
Fitch initiatives the fiscal deficit will hit 5.2 p.c of GDP within the 2025/26 fiscal yr (FY), lacking the National Treasury’s goal of 4.7 p.c.
Debt servicing prices are anticipated to rise sharply, with the interest-to-revenue ratio climbing to 33 p.c, considerably above the 15 p.c median for equally rated friends.
According to Treasury forecasts, income is anticipated to rise to 17.5 p.c of GDP in 2025/26 FY, up from 17 p.c within the present yr, whereas expenditure is projected to say no to 22 p.c of GDP.
However, Fitch stays cautious, projecting income will solely attain 17.2 p.c, citing Kenya’s persistent shortfalls and weaknesses in public monetary administration.
The Finance Act 2025, which averted introducing new taxes, as an alternative seeks to boost tax compliance by way of digitization and discount of tax exemptions.
Fitch, nonetheless, sees restricted positive factors from the reforms, warning that implementation challenges and income leakages might undermine progress.
Treasury additionally plans to finance the 2025/26 FY funds by way of a mixture of home and exterior borrowing, concentrating on Sh655 billion in whole borrowing.
Of this, about $5 billion (roughly 3 p.c of GDP) will come from overseas sources, together with concessional loans from the World Bank and African Development Bank, though no IMF assist is anticipated following cancellation of the nation’s program.
Despite mounting fiscal stress, Kenya’s actual GDP is anticipated to develop by 4.9 p.c in 2025, pushed by stronger personal sector exercise and easing inflation, which stood at 4.5 p.c in 2024.
Fitch warned that additional score motion would rely on Kenya’s capacity to maintain exterior buffers and obtain significant fiscal consolidation.
“A pointy decline in reserves or failure to slim the fiscal deficit may set off a downgrade,” the company mentioned.
Conversely, enhanced income efficiency and a declining debt burden may pave the best way for a optimistic outlook.
