The African Union (AU) through its African Peer Review Mechanism (APRM) has disputed Moody’s Global Credit Rating Agency’s recent decision to revise Kenya’s economic outlook from negative to positive.
Moody's, while projecting improvement in the country's economy, cited a potential ease in liquidity risks and continued improvement in debt affordability over time.
However, APRM on Monday, January 27, revealed that Moody’s made an error by drastically shifting the country’s outlook from 'negative' to 'positive' and skipping a 'stable' position.
While taking issue with the rating, APRM noted that the credit rating agency’s recent announcement was an attempt to amend a mistake it made last year when it downgraded Kenya's economic outlook to negative.
“This rating action was a reversal of Moody's premature rating action on July 8, 2024, which was largely driven by protests in Kenya over the proposed Finance Bill,” the commission noted in a statement.
The statement comes a day after President William Ruto expressed satisfaction with the country's economic trajectory, referencing the recent upgrade by Moody's.
Speaking on Sunday, January 26, during a church service in Nairobi, the Head of State attributed the positive economic projection to the stringent policies put in place by his administration.
"Just yesterday we got good news about what God is doing to heal our nation. Working together, we have seen inflation numbers, interest rates and exchange rates coming down, President Ruto said.
However, APRM termed last year’s rating, which downgraded the country's credit ratings to "Caa1" from "B3", as speculative since data on the Appropriation Bill, the budget and the Finance Bill had not yet been released when the rating was done.
According to the commission, it was not the first time Moody's had acted prematurely and erred in its analysis with the African Union adding that in January 2023, the credit rating agency also made a similar mistake for Nigeria.
AU disclosed that for Nigeria’s case, Moody’s downgraded the West African nation’s outlook from 'B3' to 'Caa1' citing that the government's fiscal and debt position was expected to deteriorate further under the new administration.
Nonetheless, the Nigerian government challenged the inaccuracy of that rating stating that Moody’s lacked an understanding of the country's domestic environment.
Moody's later reversed Nigeria's outlook from 'stable' to 'positive' in December 2023, citing positive economic policy developments in the country.
APRM while taking a swipe at the global rating agency, termed such rating actions as irresponsible and detrimental. According to APRM, such improper ratings could lead to unnecessary costs to governments, triggering Eurobond sell-offs, and sustaining a negative sentiment on African instruments.
“Moody's is strongly encouraged to be diligent and wait for the complete term review data before taking rating actions rather than taking speculative and premature rating actions based on missing or incomplete Information,” APRM noted.
