By Stephen Nakrosis
Moody’s Investors Service said Friday it was downgrading the government of Kenya’s long-term foreign-currency and local-currency issuer ratings and senior unsecured debt ratings to B3.
The rating had previously been B2, with a negative outlook, Moody’s said.
The rating downgrade was driven by an increase in government liquidity risks, Moody’s said.
“Domestic funding conditions have deteriorated considerably over the past two months, with very low net domestic issuance contributing to financing shortfalls and delays in government spending,” according to the ratings agency.
Moody’s also said it was placing Kenya’s ratings on review for downgrade, “prompted by the risk that the deterioration in Kenya’s domestic financing conditions persists amid still constrained external financing options.” The review will focus on domestic funding conditions, the cost of domestic borrowing, and “the extent to which net domestic financing improves at the expense of a worsening in debt affordability,” among other things, Moody’s said.
Moody’s also said it expects Kenya’s interest-to-revenue ratio to peak at 28% in fiscal year 2023, and remain at 26% in the subsequent two years.
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