Kenya needs voluntary debt restructuring to avoid default, economists say

Moody’s on 12 May downgraded Kenya’s long-term foreign-currency and local-currency issuer ratings from B2 to B3, and put the ratings on review for further downgrade, citing “an increase in government liquidity risks”. Weak demand for government securities means that the government has fallen behind its net domestic financing target for the fiscal year ending June 30, Moody’s says.

President William Ruto’s government plans to raise 521bn shillings ($3.8bn), or 3.2% of GDP, in fiscal year 2024. That will be “challenging” without a rise in borrowing costs or improved investor demand, Moody’s says. The country faces a $2bn Eurobond maturity in June 2024.

Kenya needs to “come to the table with creditors and find a way of restructuring the debt,” says Reginald Kadzutu, CEO at Amana Capital in Nairobi. Debt service costs are now eating close to 70% of all revenue collected, he says.

Government