Ahead of Elections, Fitch Affirms Kenya at ‘B+’, Negative Outlook

Ahead of the August elections, Fitch Ratings has affirmed Kenya’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘B+’ and said that the outlook remains negative.

The agency has also affirmed Kenya’s senior unsecured foreign-currency bonds at ‘B+’.

“The Country Ceiling has been affirmed at ‘BB-‘ and the Short-Term Foreign and Local Currency IDRs at ‘B’.” The agency said.

The ratings have factored in an improved economic growth which is partly because of an ‘improved business environment’ according to Fitch.

“Kenya’s solid growth record, strong medium-term growth potential, and favourable business environment. However, the ratings are constrained by Kenya’s low GDP per capita, sizeable current account and budget deficits, and political risks.” said the agency in a statement.

Fitch forecasts GDP growth to slow to 5.4% in 2017, down from the 5.8% outturn in 2016.


“Slowing credit growth and uncertainty around the upcoming August elections are also weighing on the economy. However, Fitch continues to assess Kenya’s medium-term growth potential as strong, sustained by improved security that has fuelled a recovery in tourism and high public spending that supports the construction sector.” said Fitch.

Fitch envisages some limited disruption around the 8 August general elections but they do not foresee violence at the level of 2007. However, Fitch notes that opposition’s frequent disputes with the Independent Electoral and Boundaries Committee (IEBC) raises the prospect that a NASA loss could lead to protests.

According to Fitch, the Kenyan banking sector is highly fragmented, with large domestic banks characterised by healthy funding and balance-sheet liquidity and small banks, into which they have little insight.

“Asset quality has deteriorated, with non-performing loans rising to 10% of total loans as of end-April 2017 from 6% at end-2015. Additionally, the full effects of the interest rate cap that was instituted in September 2016 have yet to become clear, but initial indications show evidence of credit rationing.” it said.