Rating agency Moody’s has just published a report confirming Kenya’s fiscal stability. This news has been welcomed with optimism by investors and economic analysts. This confirmation comes in a context where the country has made efforts to stabilize its economy after years of financial challenges. Moody’s has revised Kenya’s sovereign credit outlook from “negative” to “positive,” marking a key change just seven months after the country’s downgrade. Despite this optimistic revision, Kenya’s fiscal landscape remains fraught with challenges. Kenya’s revenue collection efforts remain a crucial factor in the country’s fiscal recovery.

Budgetary Policy Appreciated by Moody’s

Although long-term local and foreign currency issuer ratings remain at Caa1, this improved outlook highlights Kenya’s potential. Notably, its debt capacity and ability to mitigate liquidity risks. Despite this evolution, Kenya continues to face high financing needs and low borrowing capacity, presenting both opportunities and obstacles.

Last week, Moody’s confirmed the progress made by Kenya in addressing its liquidity issues, citing notably the decline in domestic financing costs and the alleviation of monetary pressures. This evolution results from the government’s fiscal management efforts.

According to the latest government data, Kenya’s gross domestic product (GDP) recorded a growth of 5.2 % in 2024, a figure that surpasses initial forecasts of 4.8 %. This growth is supported by key sectors such as agriculture, tourism, and information technology. In 2023, Kenya’s GDP was estimated at around 95 billion USD, and with projected growth, it could reach nearly 100 billion USD by 2025.

Optimism in the Sector and Investment Opportunities

The improved credit outlook has generated enthusiasm among economic actors and policymakers. Lee Kinyanjui, Cabinet Secretary of the Ministry of Commerce and Investments, expressed confidence in the impact of this assessment on the country’s image.

“This improved outlook is expected to lead to further positive ratings from other global agencies, which is very encouraging. The upward revision of Moody’s positive outlook is an important step in our journey to position Kenya as a premier investment destination,” said Kinyanjui.

The revised outlook is expected to strengthen Kenya’s attractiveness to international investors, thereby consolidating its position as a regional economic powerhouse. Increased investor confidence could lead to greater capital inflows, thereby fostering economic recovery and growth.

In a note published after Moody’s announcement, Kenya’s National Treasury stated that this reevaluation is the result of targeted government reforms. These reforms allow for:

• Improved economic stability
• Reduced liquidity risks
• Enhanced debt capacity

The optimism surrounding Kenya’s fiscal stability is attracting the attention of foreign investors. In 2024, foreign direct investments (FDI) increased by 20 %, reaching 3.5 billion USD. The renewable energy and infrastructure sectors have particularly benefited from this capital influx, thereby enhancing long-term growth prospects.

Addressing Kenya’s Debt Issues

Despite this positive momentum, Kenya still faces high credit risks. These risks are linked to limited borrowing capacity and significant financing needs. The National Treasury reminds us that the previous downgrade had increased borrowing costs and reduced investor confidence.

“Rating downgrades lead to higher borrowing costs, low investor confidence, currency depreciation, and debt sustainability risks,” notes the Treasury in its 2025 Public Debt Management Strategy.

Kenya’s public debt represents approximately 60 % of GDP, a level considered sustainable by regional standards. In 2024, debt service is estimated at 4.5 billion USD or 15 % of total public expenditures. This situation is considered manageable, provided that economic growth is maintained.

However, Moody specifies that a sustained improvement in financing conditions and effective implementation of fiscal reforms will be essential for considering a future upgrade of Kenya’s rating.

Revenue Collection

Kenya’s revenue collection efforts remain a crucial factor in the country’s fiscal recovery. Moody’s highlights that successful revenue mobilization could further enhance the country’s debt capacity. However, the effectiveness of these efforts largely depends on the strength of institutions and policy coherence, areas in which Kenya faces several notable challenges.

The government’s ability to stabilize domestic financing costs and implement structural reforms will be critical to maintaining this positive trajectory. Improved revenue collection can reduce Kenya’s reliance on commercial borrowing, thereby mitigating the negative effects of high interest rates and market volatility.