Ruto govt needs dollars to avoid ratings downgrade
Global ratings agency Standard and Poor (S&P) says Kenya’s credit worthiness could be downgraded if the government is unable to borrow externally over the next one year.
Kenya has been unable to borrow dollar loans from the commercial market since last year after investors demanded over 10 percent due to higher lending rates in the developed countries, and heightened risk due to the country’s debt position.
Analysts say Kenya funded its deficit by almost 80 percent through local borrowing and dollars from multilateral lenders such as the International Monetary Fund (IMF) after it failed to issue a Eurobond and syndicated loans.
The ratings agency said they could lower Kenya’s credit rating if the country fails to get dollar loans which would mean less dollar reserves to pay debts and import goods, if Kenya’s economy shrunk or the government fails to tame its expenditure against limited revenues.
S&P has already cut Kenya’s rating outlook from stable to negative on shrinking forex reserves and a weakening shilling that has increased the cost on servicing external debt.
Lower ratings means investors will even ask for higher rates for dollar loans at a time Kenya is approaching its largest repayment, over Kes254.6 billion ($2 billion) borrowed almost a decade ago from the inaugural Eurobond in 2014.