Kenya’s credit rating upgraded to ‘B’ as investor confidence grows

Kenya has received a boost in investor confidence after global credit rating agency S&P Global upgraded the country’s long-term sovereign credit rating to ‘B’ from ‘B-’.

The upgrade reflects growing optimism about Kenya’s fiscal outlook and marks a positive shift in how international markets may view the country’s credit risk.

It has also affirmed the short-term sovereign credit rating at ‘B’.

Nevertheless, the transfer and convertibility rating has been raised to 'B+' from 'B', reflecting improved confidence in the country’s ability to facilitate currency exchange and cross-border capital flows.

The agency cited improved liquidity conditions and more stable economic management as key drivers behind the decision.

“The stable outlook reflects our expectation that Kenya's robust economic growth and reduced immediate external liquidity risks will help offset pressures stemming from high interest costs and a protracted fiscal consolidation process,” the agency said.

Notably, the new rating comes with a stable outlook, indicating growing confidence in Kenya’s ability to meet its debt obligations amid better access to international markets and fiscal reforms in the near future.

“The upgrade reflects our view that Kenya's near-term external liquidity risks have receded. External data revisions, coupled with strong performances in coffee exports and diaspora remittances, supported a narrowing of Kenya's current account deficit to 1.3 per cent of GDP in 2024, from 2.6 per cent in 2023.”

These improvements, according to the agency, strengthened Kenya's FX reserves to a record-high $11.2 billion (Sh1.5 trillion) in July 2025, up from $6.6 billion (Sh852.9 billion) at year-end 2023.

Additionally, it notes that Kenya's $1.5 billion (Sh193.8 billion) Eurobond issuance and concurrent buy-back operation in February 2025 helped lower Eurobond principal repayments to $108 million (Sh13.9 billion) annually over 2025-2027, from $300 million (Sh38.8 billion) previously.

S&P therefore projects the government's total external debt amortisations to remain manageable at $2.7 billion (Sh348.9 billion) in the fiscal year ending June 30, 2026, and at $3.8 billion (Sh491 billion) in fiscal 2027.

Ongoing monetary easing has also bolstered domestic funding conditions, the agency adds in part.

Since initiating its easing cycle in August 2024, the Central Bank of Kenya (CBK) has delivered seven consecutive rate cuts, lowering the policy rate by a cumulative 350 basis points to 9.5 per cent as of August 2025.

This contributed to a decline in 91-day treasury bill yields to approximately eight per cent in July 2025, down from a peak of 16 per cent in July 2024, which lowered domestic financing costs for the government.

The easing cycle was driven by contained inflation, which stood at 4.1 per cent in July 2025, and stable exchange rate dynamics.

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While both upside and downside risks to the positive outlook remain, S&P cautions that it could lower Kenya’s ratings if external refinancing pressures intensify.

This is particularly in the event of a sustained decline in foreign exchange reserves, or if future debt operations, such as repurchases or securitisations, whether domestic or external, are viewed as distressed exchanges.

On the other hand, it says it may upgrade the ratings if Kenya shows a strong and consistent commitment to fiscal sustainability, demonstrated through a marked reduction in budget deficits and interest expenses.