Credit rating agency Fitch has affirmed Kenya's sovereign credit rating at 'B-' with a stable outlook, citing consistent debt repayments and growing foreign reserves. However, the agency warns of persistent revenue shortfalls and high external debt servicing needs.
The international credit rating agency Fitch has maintained Kenya's sovereign credit rating at 'B-' with a stable outlook, attributing this to the country's consistency in meeting its debt obligations. Kenya's economy appears relatively robust compared to peers and is projected to expand in the coming years. Foreign exchange reserves have risen, reaching Ksh1.6 trillion ($12.4 billion) by the end of 2025, bolstered by exports, tourism, remittances from the diaspora, and central bank dollar purchases.
"Stronger foreign-exchange reserves reduce external financing risks, but fiscal policy is hampering prospects for multilateral financing," the agency stated. The government's liability management operations have helped mitigate near-term external liquidity risks, though the burden of external debt service remains elevated.
Fitch highlighted improvements in Kenya's capacity to service foreign debt, including the issuance of a portion of a Ksh129 billion Eurobond maturing in 2028 and the buyback of a Ksh115 billion Eurobond due in 2027. Additionally, the government converted some loans from China from US dollars to Chinese yuan, modestly lowering annual debt costs.
Nevertheless, Fitch expressed concerns over substantial funding needs for external debt repayments, with external debt financing expected to surge in 2026. "Government external debt service, including amortisation plus interest, after the buybacks of Eurobonds, is expected to rise in the financial year ending June 2026," the agency warned. Furthermore, government revenues are projected to reach 17.2 percent of gross domestic product (GDP) in fiscal year 2026, falling short of targets.
"Fitch expects revenue shortfalls in FY26, consistent with Kenya's record of underperformance and structural weaknesses in public financial management, including the government's limited capacity to raise taxes," it revealed. No International Monetary Fund (IMF) program is anticipated in fiscal 2026, and disbursements from the World Bank face uncertainty due to unmet reform criteria.
