Kenya: Ruto to improve medium-term public finances but 2022 ratings downgrade looms

By David Whitehouse
Posted on Wednesday, 7 September 2022 09:55

Ruto may be unable to prevent a sovereign rating downgrade for Kenya this year. (AP Photo/Brian Inganga)

William Ruto’s presidency is likely to be supportive for Kenya’s public finances over the medium term, REDD Intelligence senior credit analyst Mark Bohlund writes in a note published after Kenya’s supreme court confirmed Ruto’s election victory.

The confirmation increases the chances that Kenya will stay on track with its IMF program but a sovereign credit rating downgrade is likely in coming months, Bohlund writes. In April 2020, Kenya agreed to a 38-month $2.34bn loan with the IMF which is being disbursed in tranches. The new president has pledged to reign in borrowing and increase tax revenue.

Even if Ruto sticks to his pledges, Bohlund says it may be “too little too late” in terms of preventing at least one sovereign downgrade by the end of 2022. S&P rates Kenya as B with a stable outlook, and forecasts that the budget deficit will narrow to an average of 5.7% between 2023 and 2025. Fitch currently rates Kenya’s ‘B+’ with a negative outlook.