The downgrade was carried out by the Fitch Ratings agency, which lowered Kenya’s credit rating from BBB- to B+.
The Impact of the Downgrade on Kenya’s Economy
The downgrade has had a ripple effect on Kenya’s economy, with several key areas being affected. The reduction in credit rating has made it more expensive for Kenya to borrow commercial loans, which has a direct impact on the country’s ability to finance its development projects. The downgrade has also led to a decrease in investor confidence, making it more challenging for Kenya to attract foreign investment.
The country’s public debt as a percentage of GDP is at 53.1%. This is above the international benchmark of 55.5%. The National Treasury also reported that the country’s debt servicing costs amount to 10.9% of its GDP, which is higher than the international benchmark of 9%. The National Treasury also reported that Kenya’s public debt is comprised of 54.7% domestic debt and 45.3% foreign debt. The National Treasury also reported that Kenya’s debt servicing costs are increasing due to the increasing cost of borrowing, which is driven by inflation and high interest rates.
Step 1: Understanding the Context of Kenya’s Public Debt
Kenya’s public debt, which refers to the total amount of debt owed by the government to its creditors, is a significant concern for the country. The National Treasury’s report highlights that Kenya’s public debt remains sustainable, but with a high risk of debt distress.
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