Barely a month after downgrading Kenya’s credit rating, Fitch Ratings has issued a stark warning about the fiscal challenges posed by the Mpox virus that has ravaged much of East Africa.
The international credit ratings agency cautions that the virus, which continues to spread across the region, could further strain the already beleaguered economies of several sub-Saharan African (SSA) countries, including Kenya.
Fitch highlighted the potential for an acceleration in the spread of Mpox, which could exacerbate economic difficulties in affected countries.
"Virus outbreaks can have significant economic and fiscal effects," Fitch asserted in a statement, adding that some of the negative impact could be offset, however, by increased funding from rich donor nations.
The virus, declared a public health emergency of international concern by the World Health Organisation (WHO) on 14 August, has already impacted several nations in the region. Notably, Kenya, alongside Ivory Coast, Rwanda, South Africa, and Uganda, has reported confirmed cases of Mpox, signalling the growing reach of the outbreak.
The virus's economic implications could be severe, with Fitch warning that efforts to contain its spread could stifle economic activity and weaken fiscal metrics. The agency drew parallels with the Covid-19 pandemic and the 2014-2015 Ebola epidemic, both of which had devastating impacts on economies in West Africa.
While the fatality rate of Mpox is currently lower than that of Ebola, Fitch cautioned against underestimating the potential economic disruption, especially given the limited access to vaccines in the region.
Kenya, which is still grappling with the economic aftershocks of the pandemic, now faces the possibility of further fiscal strain. The tourism sector, a crucial pillar of the Kenyan economy, could be one of the hardest hit.
In 2022, tourism accounted for 11 per cent of the country’s total goods and services export earnings, according to United Nations data. A significant rise in Mpox cases could deter tourists, leading to a sharp decline in revenue from this sector.
Moreover, the ripple effects of the outbreak could extend to other critical areas of the economy. Fitch noted that disruptions in food production and logistics could lead to inflationary pressures, compounding the challenges of managing the country’s economic stability.
This scenario would be particularly concerning for Kenya, where inflation is already a pressing issue, driven by high fuel and food prices.
The fiscal impact could also be substantial, with the government likely needing to increase spending on healthcare and epidemic-prevention measures. At the same time, weaker economic activity would depress tax revenues, further widening the fiscal deficit.
While international assistance could help mitigate these effects, Fitch warned that the timing and scale of such support remain uncertain.
Fitch’s warning comes at a critical time for Kenya, as the country navigates a delicate balance between managing its public health crisis and sustaining its economic recovery. The agency's recent downgrade of Kenya's credit rating to 'B-/Stable' reflects growing concerns about the country’s ability to manage its fiscal challenges.
The added pressure from the Mpox outbreak could exacerbate these concerns, potentially leading to further downgrades if the situation deteriorates.
The broader implications for the region are equally troubling. As Mpox continues to spread, other African countries could face similar fiscal pressures.
Rwanda and Uganda, both of which rely heavily on tourism, could see significant economic impacts if the outbreak worsens. In South Africa, where the economy is already under strain, the virus could further weaken fiscal metrics, leading to potential rating downgrades.
