Fitch lowers Kenya to negative

Fitch Ratings said it revised the outlook on Kenya to negative from stable.

The agency also said it affirmed Kenya’s long-term foreign- and local-currency issuer default ratings at B+ and BB-, respectively. The agency also affirmed its short-term issuer default rating at B, country ceiling at BB- and senior unsecured foreign- and local-currency bonds at B+.

The outlook revision reflects the steady deterioration of Kenya’s public finances since 2008 as a result of its weak revenue performance, increasing infrastructure spending and persistently high current expenditure, Fitch said.

The government plans to increase domestic borrowing to 3.4% of GDP, up from 2.9% of GDP, the agency said. This could put upward pressure on domestic yields, which have risen sharply recently due to an increase in the Central Bank Rate, Fitch said.

Kenya’s current account deficit also is structurally wide, reflecting stagnant exports and a capital-intensive import bill due to rapid infrastructure investment, the agency said.

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