Moody's upgrades Kenya's credit rating; what it means for the country

The agency raised Kenya’s rating to B3 from Caa1 and changed the outlook to stable, signalling that the country’s risk of failing to repay its debts in the near term has reduced.

While the upgrade does not mean Kenya is out of danger, it suggests that the country is less likely to default on its debts in the near term. 

The agency pointed to several factors that influenced the upgrade, such as higher foreign exchange reserves, which rose to about Ksh.1.5 trillion ($12.3 billion) by the end of 2025, according to the Central Bank of Kenya data. 

Another key factor is a narrower current account deficit, meaning the country is spending less foreign currency than before, a stable shilling, which reduces pressure on foreign debt and Kenya's return to international bond markets, allowing the government to refinance and push major debt repayments further into the future. 

Moody’s also noted that the government has been able to raise more money locally, reducing its immediate dependence on foreign lenders.

However, the agency cautioned that Kenya still struggles with high debt costs, weak revenue collection, and large budget deficits.

Kenya’s B3 rating places it in the speculative category, meaning that the country can still borrow, but often gives a warning for lenders to remain cautious.

What this means for the common mwananchi 

In the short term, the upgrade brings some positive signals such as lower pressure on interest rates, improved investor confidence and less risk of an immediate debt crisis. 

For the common mwananchi, this translates into ease of doing business in the long-term aspect due to slightly improved economic factors. 

Areas to improve

Despite the upgrade, Moody’s warned that Kenya’s long-term challenges remain serious as the government spends over 30 per cent of its revenue on interest payments, leaving less money for services. 

Further, the agency pointed out that the public debt remains high at about 67 per cent of Gross Domestic Product (GDP), meaning that a large portion of the country’s economic output is already tied up in debt, limiting the government’s ability to spend on essential services

Other factors that Moody’s warned about include inconsistent revenue collection, which weakens the government’s ability to fund its operations reliably, and political and social pressures that make it difficult to implement spending cuts and introduce tax reforms needed to stabilise public finances.

In the long run, if debt remains expensive and deficits stay large, Kenyans could still face higher taxes, reduced government services, slower job creation and continued pressure on the cost of living. 

Moody’s said future upgrades would depend on the government’s ability to control spending, raise revenue sustainably, and reduce reliance on borrowing.

As of now, Kenya’s credit rating upgrade reduces the risk of a near-term debt crisis and reassures investors, but it also emphasizes the need for the government to manage debt prudently, strengthen public finances, and support economic growth for long-term benefits to reach the common mwananchi. 

Until then, the rating offers cautious optimism, not a clean bill of health.

About Moody's and its rating system

Moody’s is a global credit rating agency based in New York that assesses the likelihood that governments and companies will repay borrowed money.

In simple terms, Moody’s acts as a financial referee for investors, and its ratings help lenders decide whether it is safe to lend to a country and at what interest rate.

When rating countries, Moody's considers several factors such as industry trends, regulatory environment, geopolitical factors, financial ratios, cash flow, debt levels, market position and management quality.

Credit ratings are meant to show risk; thus countries with high ratings are seen as safe borrowers, while countries with low ratings are seen as risky and must pay higher interest.