Global credit ratings agency Fitch Ratings has affirmed Kenya’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-’.
The agency also maintained the country’s Stable Outlook, citing improved external liquidity conditions that remain constrained by persistent fiscal pressures and governance challenges.
In a rating action commentary issued on Friday, January 23, 2026, Fitch said the decision reflects Kenya’s medium-term growth prospects, a relatively diversified economy, and rising foreign exchange reserves, while warning that structural weaknesses continue to weigh on credit quality.
“The affirmation reflects Kenya’s strong medium-term growth prospects, a diversified economy relative to peers and the build-up of official reserves.”
External pressures ease, but risks persist
Fitch said external liquidity pressures have moderated due to proactive liability management and a steady accumulation of foreign exchange reserves.
The government partially refinanced a $1 billion Eurobond due in 2028 in October 2025 and earlier refinanced a $900 million Eurobond due in 2027 in February 2025.
In addition, part of Kenya’s U.S. dollar-denominated debt owed to the Export-Import Bank of China was converted into renminbi-denominated liabilities, reducing servicing costs by an estimated 0.1% of GDP annually.
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The agency estimates that gross foreign exchange reserves rose to $12.4 billion by the end of 2025, supported by portfolio inflows, official loans, strong exports, tourism earnings, remittances, and recent central bank FX purchases. Fitch projects reserves will provide coverage of about four months of external payments in 2026.
“Stronger foreign-exchange (FX) reserves reduce external financing risks, but fiscal policy is hampering prospects for multilateral financing,” the rating action commentary adds.
Despite the improvement, Fitch expects Kenya’s current account deficit to widen to 2.6% of GDP in 2026, from an estimated 2.3% in 2025, driven by higher imports and rising external interest costs.
Fitch highlights high financing needs and fiscal strain
The credit rating agency warned that Kenya’s external financing requirements remain elevated. Government external debt service is projected to rise to $5.3 billion (3.7% of GDP) in the financial year ending June 2026, before easing in FY27 and rising again beyond $5 billion annually between FY28 and FY30.
The agency forecasts a fiscal deficit of 5.8% of GDP in FY26, exceeding both the government’s 4.7% target and the median for ‘B’-rated sovereigns.
Fitch said fiscal consolidation efforts are likely to face headwinds from rising interest payments, drought-related expenditure, and increased social and security spending ahead of the 2027 General Election.
“Fitch expects fiscal consolidation efforts to be hampered by rising spending commitments, especially interest payments, drought-related expenses, and higher social and security-related expenses ahead of the 2027 elections.”
Fitch expects Kenya’s interest-to-revenue ratio to remain above 30%, significantly higher than the median for ‘B’-rated peers, despite easing slightly from a peak of 33.8% in FY25. General government debt is forecast to decline marginally to 68.6% of GDP by FY27, still well above peer medians.
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The agency noted that the share of foreign-currency-denominated government debt declined to 46% by end-FY25, moderating exchange-rate risks, although increased reliance on domestic borrowing continues to keep interest costs high.
On governance, Fitch assigned Kenya an ESG Relevance Score of ‘5’, pointing to weak institutional capacity, uneven application of the rule of law, and corruption risks as factors weighing on sovereign creditworthiness.
S&P upgrade in 2025
The Fitch affirmation follows Standard & Poor’s (S&P) decision in August 2025 to upgrade Kenya’s long-term sovereign credit rating from ‘B-’ to ‘B’, citing reduced near-term external liquidity risks.
S&P pointed to stronger export earnings, higher diaspora remittances, and improved debt-liability management, including Eurobond buybacks that significantly reduced near-term principal repayments.
The agency also highlighted the impact of monetary easing by the Central Bank of Kenya, which helped reduce domestic borrowing costs and support a gradual recovery in private-sector credit growth.
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