Global credit ratings agency Fitch downgraded Kenya’s sovereign rating to “B-” from “B” on Friday, citing heightened risks to the East African country’s public finances after the government backtracked on key revenue measures following protests.
Bowing to pressure from protesters, the Kenyan government had to withdraw its 2024/25 tax plan in June to raise $2.7 billion more in revenue. The plan was recommended by the International Monetary Fund (IMF) to address fiscal imbalances.
Fitch said the risk of prolonged social unrest remains, significantly complicating the environment for fiscal consolidation.
The agency also expects some challenges for Kenya in securing external financing, partly due to high borrowing costs on the back of low foreign-exchange reserves.
Rival ratings agency Moody’s last month downgraded Kenya’s credit rating further into junk status, while S&P will wait until Aug. 23 to make any key rating change.
Fitch, however, maintained its outlook on Kenya at “stable”, citing strong official creditor support which would help the country’s near-term external liquidity pressures.
Kenya considers the support of the IMF and the World Bank crucial to its strategy of navigating its heavy debt repayment burden.
In response to the mass protests over its tax plans, Kenya’s government proposed plans to cut down spending and widen the fiscal deficit in a revised budget outlined in July.