After Kenya experienced a series of credit rating downgrades by major global agencies last year, the government has expressed concerns about further downgrades.
In its 2025 Public Debt Management Strategy released on Monday, the government lists ‘risk of further credit downgrade’ as part of the key risks to macroeconomic assumptions.
This comes as the National Treasury revealed that the recent downgrade of the country's credit rating has significantly impacted its ability to borrow commercial loans from various credit sources.
"Rating downgrades lead to increased borrowing costs, limiting access to credit markets, low investor confidence, currency depreciation, and debt sustainability risk," the Treasury stated in its report.
The downgrades were occasioned by concerns over the country’s fiscal policies and rising public debt, which has not eased yet. According to the Kenya National Bureau of Statistics (KNBS), Kenya’s debt stands at Ksh10.53 trillion, and President William Ruto’s government continues the borrowing trend.
In July, Moody's Ratings downgraded Kenya's sovereign credit rating from "B3" to "Caa1," citing the government's reduced capacity to implement fiscal consolidation strategies.
This downgrade followed the withdrawal of proposed tax hikes intended to raise Ksh346 billion, a decision made in response to mass protests. Moody's expressed skepticism about the government's ability to introduce significant revenue-raising measures amid heightened social tensions.
Barely a month later, Fitch Ratings downgraded the country's sovereign rating from "B" to "B-," highlighting increased risks to public finances after the government reversed key revenue measures.
Fitch, in its report released in August, cited the risk that prolonged social unrest complicates the environment for fiscal consolidation and may challenge Kenya's ability to secure external financing due to high borrowing costs and low foreign exchange reserves.
Later the same month, S&P Global Ratings lowered Kenya's long-term sovereign credit rating to "B-" from "B." The agency attributed this downgrade to the government's decision to rescind all tax measures proposed under the 2024/2025 Finance Bill, which was expected to slow fiscal consolidation efforts.
Despite the downgrade, S&P maintained a stable outlook, anticipating strong economic growth and continued access to concessional external financing.
However, the Treasury remains bullish on Kenya's public debt stock, insisting it remains sustainable but with a high risk of debt distress, as the nation's present value of public debt was 63 per cent of the gross domestic product (GDP), against the benchmark debt threshold of 55 per cent of debt to GDP.
It also said that due to the downgrade, it intends to borrow 25 per cent of its gross borrowing from external sources and 75 per cent from the domestic market during the period.
