Credit Rating Agency, Moody’s, has maintained Kenya’s loan outlook for 2021 at negative status, citing coronavirus’s negative effects, which has weighed down economic activities, government finances, and complicated policy choices.
According to the 2021 Moody’s Sovereign Outlook, 60% of Kenya’s 108 sovereign rating actions have been negative – a higher proportion than 20% in 2019 and 30% in 2018. The report says the global coronavirus pandemic associated expenditures and revenue loss have led to widening fiscal deficits and record-high debt levels.
Kenya has been forced to expand its expenditure for the current financial year by almost KSh200 billion amid a projected drop in revenue collection. In the 2020 Budget Review and Outlook Paper, the exchequer has raised expenditure for the year to KSh2.92 trillion, up from KSh2.76 trillion. To cover the deficit, the country plans to borrow just above KSh1 trillion up from KSh840 billion as earlier planned.
It comes just five months after Moody’s changed the outlook on the Government of Kenya’s ratings to negative from stable, affirming its B2 issuer and senior unsecured ratings.
It attributes the negative score to the country’s rising financing risks posed by large gross borrowing requirements, including amortisation of external bilateral debt and the need to refinance a large stock of short-term domestic debt.
Moody’s expects Covid-19 to continue weakening Kenya’s fiscal balance in the current financial year as weaker revenue collection and fiscal measures in response to the pandemic delay fiscal consolidation.
However, Moody’s is not the only agency to have lowered the country’s outlook. In July, S&P) lowered the country’s sovereign credit outlook to ‘negative’ from ‘stable’, citing unstable economic growth due to coronavirus pandemic. In May, IMF also raised Kenya’s risk of debt distress to high from moderate in a statement because of the costly impact of the worsening COVID-19 crisis.