Kenya foreign debt has been rated junk, non-investment grade speculative 11 ranks below the premium triple-A ratings given to America.
Moodys downgraded Kenya’s overall ratings to B2 from B1, local debts from B2 to B3 and foreign loans from Ba2 to Ba3.
Save for pricing, credit ratings have however diminished in relation to whether a bond gets taken up or not.
Junk-rated emerging market sovereigns have raised $75 billion (Sh7.5 trillion) in syndicated bonds last year, up 50 percent year on year to the highest total on record, according to figures from Dealogic – a data provider.
The rating agency dismissed by Finance Cabinet Secretary Henry Rotich as ‘Desktop Analysis’ has differed with S&P and Fitch contracted by the government to do a review of Kenya’s debt position.
Fitch and S&P both said Kenya’s long-term debt was stable at B+ which would mean that is less likely to default on the debt.
Treasury failed to convince Moodys that it will spend less and therefore needed fewer loans in the future by consolidating its budget.
This the ratings say is especially due to spending pressures on social initiatives as healthcare and free school as well as the need for development to keep GDP growing.
Moody’s forecasts government debt to increase to 61 percent of GDP in the next fiscal year (2018/19) when Kenya’s debt tips over Sh5 trillion from 56 percent of GDP in financial year 2016/17 and 41 percent of GDP in 2012.
The ratings come at a crucial time for the government as Treasury shuttles between the United Kingdom and the United States talking to investors over issuing $1.5 (Sh151 billion) and $3 billion (Sh303 billion).
The Eurobond roadshow is expected to test investors’ appetite and the rates at which they will be willing to take up the dollar debt.