S&P Maintains Kenya’s Credit Rating but Flags Rising Debt and Fiscal Risks

Global rating agency S&P Global Ratings has upheld Kenya’s sovereign credit rating at B with a stable outlook but cautioned about growing fiscal vulnerabilities ahead of the 2027 General Election.

S&P projects Kenya’s fiscal deficit could expand to 7.1 percent of GDP in the 2026/27 financial year, surpassing the Treasury’s target of 5.5 percent. This widening gap is attributed to revenue shortfalls, rising interest payments on debt, and increased government expenditure, including costs linked to the ongoing Middle East conflict.

The agency maintained Kenya’s long-term and short-term foreign and local currency ratings at B, and kept the transfer and convertibility assessment at B+.

Economic Growth and External Position

• S&P lowered Kenya’s 2026 growth forecast to 4.9 percent from 5.1 percent, citing higher costs for energy, fertilisers, and imports due to geopolitical tensions.
• The current account deficit is expected to widen to 3 percent of GDP, with trade disruptions and rising production costs putting pressure on household incomes.
• Despite challenges, Kenya’s external reserves have strengthened significantly, reaching $15.3 billion (Ksh1.98 trillion) in August 2026, up from $6.6 billion in December 2023.
• Boosts in tourism, diaspora remittances, portfolio inflows, and privatisation proceeds have enhanced the country’s buffer against external shocks.

Outlook and Government Plans

The Treasury anticipates a rebound in economic growth to 5.1 percent in 2027, supported by easing external pressures and improved global supply chains. However, persistent high oil prices may continue to fuel inflation and increase import costs.

Kenya also plans to re-enter international capital markets for borrowing and aims to access up to Ksh151.2 billion in World Bank funding during the 2026/27 fiscal year.