By Nia Okoye, African CEO Magazine
Moody’s Investors Service has upgraded Kenya’s long-term foreign currency sovereign credit rating to “B3” from “Caa1”, citing improved external buffers that have eased the country’s near-term default risk.
The ratings agency highlighted Kenya’s stronger external liquidity position, supported by higher foreign-exchange reserves, a narrower current account deficit, and a more stable shilling. These developments have provided the East African powerhouse with greater resilience against external shocks.
Kenya’s economy—the largest in the region—registered notable growth in the third quarter of 2025. The rebound was driven by renewed activity in the construction sector and faster-than-expected expansion in agriculture, underscoring the country’s capacity to sustain recovery momentum.
At the close of 2025, Kenya’s international reserves rose to $12.2 billion, equivalent to 5.3 months of import coverage. This cushion has significantly bolstered the nation’s ability to withstand volatility in global markets.
Despite the upgrade, Moody’s cautioned that Kenya’s rating remains constrained by weak debt affordability and slow fiscal consolidation. Elevated domestic borrowing costs, coupled with political and social pressures, continue to limit the government’s ability to narrow its fiscal deficit, leaving the country exposed to shifts in financing conditions.
With high public debt and looming repayments, Kenya has been actively seeking new financing avenues to sustain development spending and infrastructure investments. The government is currently in talks with the International Monetary Fund (IMF) regarding a new programme following the expiry of the previous arrangement in April. Additionally, Nairobi is exploring innovative funding mechanisms, including a debt-for-food swap expected in the first half of this year.
Moody’s also revised Kenya’s outlook to “stable” from “positive”, reflecting expectations that recent improvements in liquidity and financing conditions will hold steady, with risks broadly balanced around the baseline scenario.
