NAIROBI, Jan 28 – Moody’s Ratings has upgraded Kenya’s sovereign credit rating, citing a reduced risk of near-term default and improving debt management conditions.
The agency raised Kenya’s long-term foreign currency rating to B3 from Caa1, moving the country six notches below investment grade. At the same time, Moody’s revised the outlook to stable from positive, signalling that while immediate risks have eased, longer-term challenges remain.
The East African nation successfully returned to international capital markets in 2025, completing two Eurobond issuances totaling $3.0 billion. Part of these proceeds were used to buy back $1.2 billion of bonds maturing between 2026 and 2028, effectively pushing the next large Eurobond maturity to 2030.
Domestic financing conditions have also improved, with Treasury bill yields declining to below 8% in December 2025 from 9.9% a year earlier. The average interest rate on newly issued Treasury bonds fell to around 13.5% in the first half of fiscal 2026 from nearly 15% in the prior fiscal year.
The upgrade triggered a rally in Kenya’s dollar-denominated bonds, reflecting renewed investor confidence following a period of heightened concern over debt sustainability and external financing pressures.
“Heavy reliance on domestic borrowing supports near-term financing capacity, but high domestic interest rates will keep the interest costs elevated and constrain already very weak debt affordability,” Moody’s stated.
Moody’s said the decision reflects improved liquidity conditions, stronger policy credibility, and reduced refinancing risks, following steps taken by the government to manage external obligations and secure financing support.
Kenya has faced sustained pressure in recent years from high debt-servicing costs, currency weakness, and constrained access to international capital markets. The rating action suggests that immediate default concerns have diminished, though structural fiscal challenges continue to weigh on the country’s credit profile.
The stable outlook indicates that further upgrades will depend on Kenya’s ability to sustain fiscal consolidation, stabilise debt ratios, and strengthen economic growth while managing social and political pressures.
