Moody's trims Kenya

Moody's Investors Service said it downgraded the government of Kenya's long-term foreign-currency and local-currency issuer ratings and senior unsecured debt ratings to B3 from B2 and placed the ratings on review for downgrade. Before this rating action, Kenya's outlook was negative.

“The rating downgrade is driven by an increase in government liquidity risks. 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. While demand for domestic debt issuance will likely improve, it will remain sensitive to government economic policies, particularly related to fiscal consolidation, and external financing conditions, signaling overall government liquidity risk has increased,” Moody’s said in a press release.

Concerns about the risk of weak domestic financing conditions continuing with still limited external financing options triggered the review, the agency said.

Moody’s said it will study domestic funding conditions and the government's ability to rely on domestic debt to meet most of its net financing needs, preserving external funding options to meet large external debt refinancing needs. “The review will also focus on the cost of domestic borrowing and the extent to which net domestic financing improves at the expense of a worsening in debt affordability.”

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