Global credit ratings agency Fitch downgraded Kenya’s sovereign rating from “B” to “B-” on Friday, citing increased risks to the country’s public finances following the government’s reversal of key revenue measures due to protests.
Under pressure from protesters, the Kenyan government withdrew its 2024/25 tax plan in June, which was intended to raise an additional $2.7 billion in revenue. This plan had been recommended by the International Monetary Fund (IMF) to address fiscal imbalances.
Fitch highlighted the risk of prolonged social unrest, which significantly complicates the environment for fiscal consolidation. The agency also noted potential challenges for Kenya in securing external financing, partly due to high borrowing costs and low foreign-exchange reserves.
While rival ratings agency Moody’s downgraded Kenya’s credit rating further into junk status last month, S&P plans to make a key rating decision on August 23. Despite the downgrade, Fitch maintained its outlook on Kenya as “stable,” citing strong support from official creditors, which is expected to alleviate near-term external liquidity pressures.
Kenya considers support from the IMF and the World Bank crucial for managing its substantial debt repayment burden. In response to mass protests over its tax plans, the Kenyan government proposed cutting spending and widening the fiscal deficit in a revised budget outlined in July.