(Reuters) – Global ratings agency Moody’s (NYSE:MCO) revised Kenya’s outlook to “positive” from “negative” on Friday, citing a potential ease in liquidity risks and improving debt affordability over time.
The East-African country has been struggling with heavy debt and looking for new financing lines since last year due to nationwide protests against proposed tax increases.
Domestic financing costs have started to decline amid a monetary easing cycle and this could continue if the Kenyan government effectively manages its fiscal consolidation, opening doors for external funding options, the report said.
“Given low inflation and a stable exchange rate, there is potential for further reductions in domestic borrowing costs as past monetary policy rate cuts pass through to lower long-term borrowing costs,” Moody’s said.
The agency added that a new International Monetary Fund program would enhance Kenya’s external financing while other multilateral creditors such as the World Bank will continue to be significant financing sources, even without the IMF funding.
The agency affirmed Kenya’s local and foreign-currency long-term issuer ratings at “Caa1”, citing still elevated credit risks driven by very weak debt affordability and high gross financing needs relative to funding options.
