NAIROBI,Kenya— Credit ratings agency Fitch Ratings has retained Kenya’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook, highlighting steady economic growth but cautioning over fiscal pressures and weak governance.
The affirmation comes amid signs of recovery in the country’s macroeconomic environment, supported by enhanced foreign exchange reserves, improved investor confidence, and a resilient private sector.
Kenya’s reserves rose to $11.1 billion by June 2025, following the early repayment of a $2 billion Eurobond in February and increased inflows from exports, tourism, and remittances.
“Kenya’s diversified economy and policy reforms have supported a recovery in investor confidence,” Fitch said in its latest commentary.
Still, the agency flagged significant challenges, adding that “weak governance indicators, rising debt costs, and revenue mobilization constraints remain key risks.”
Fitch projects Kenya’s fiscal deficit will widen to 5.2% of GDP in the 2025/26 financial year, overshooting the Treasury’s projection of 4.7%.
This follows previous shortfalls, including a 5.8% deficit in FY2024/25, driven by faster expenditure growth than revenue collection.
Although the Treasury anticipates increasing revenue to 17.5% of GDP, Fitch expects a more modest outcome of 17.2%, citing Kenya’s history of underperformance and systemic gaps in public financial management.
The Finance Act 2025, which avoided new taxes amid public resistance, focuses instead on tightening tax administration and reducing exemptions.
Fitch remains doubtful of its immediate impact, stating that implementation risks and persistent leakages could limit results.
Kenya plans to finance the FY2025/26 budget using a blend of local and external borrowing, including nearly $5 billion in foreign loans.
While part of this is expected from the World Bank and African Development Bank, uncertainty looms after the cancellation of the country’s IMF programme.
Interest payments are projected to rise, with debt servicing costs consuming 33% of total government revenue more than double the average for similarly rated economies.
Despite fiscal headwinds, Fitch projects GDP growth will accelerate to 4.9% in 2025, supported by renewed private sector activity and easing inflation, which dropped to 4.5% in 2024.
The rating agency warned that fiscal slippage, declining reserves, or social unrest could result in a downgrade, while successful fiscal reforms and stronger buffers could improve Kenya’s rating outlook.
