S&P Rating affirmation

S&P Global Ratings affirmed Kenya's long‑ and short‑term sovereign credit ratings at B/B for both foreign and local currency debt, maintaining a stable outlook. The transfer and convertibility assessment remains unchanged at B+.

Outlook rationale

The stable outlook reflects expectations of strong economic growth and continued access to concessional external financing, balanced against pressures from high interest costs, slower fiscal consolidation and external imbalances. The ongoing Middle East conflict adds renewed strain to Kenya’s external position, which is vulnerable to shocks in global energy and food markets. Kenya entered the conflict with stronger external buffers than in past crises, supported by record foreign‑exchange reserves and relative exchange‑rate stability.

Fiscal projections and policy measures

S&P forecasts a fiscal deficit of 7.1% of GDP for fiscal year 2027, wider than the government’s target of 5.5%, driven by persistent revenue shortfalls, election‑related spending pressures, elevated interest costs, and extraordinary expenditure linked to the Middle East conflict. In response to global supply risks, the government raised the fertilizer subsidy allocation to KES 18 billion (≈ $139 million), up from KES 8 billion. It also reduced the value‑added tax rate on petroleum products to 8% from 16% between April and June, extending the reduced rate to September, at an estimated fiscal cost of about KES 9 billion (≈ $70 million) per quarter.

External buffers and current‑account outlook

Foreign‑exchange reserves reached $15.3 billion by August 2026, up from $6.6 billion in December 2023, driven by robust growth in tourism receipts, diaspora remittances, non‑resident portfolio inflows, and privatization proceeds. S&P revised its 2026 current‑account deficit forecast wider by 0.3 percentage points of GDP to 3.0% and lowered its 2026 GDP‑growth projection by 0.2 percentage points to 4.9%. Higher costs for energy, fertilizer and other imports, combined with trade and logistics disruptions, are expected to raise production costs and erode household purchasing power.

International financing developments

The IMF failed to disburse the ninth and final review of Kenya’s extended credit facility in March 2025, citing insufficient progress on key fiscal and debt targets. The World Bank approved a $750 million development policy operation in May 2026, which also unlocks potential additional support through a $500 million sustainability‑linked loan. Other external financing sources for fiscal 2026 include:

  • African Development Bank’s policy‑based operation budget support upsized to $325 million from $260 million;
  • A second $500 million Samurai bond;
  • An inaugural sukuk and panda bond;
  • Additional Eurobond issuances.