Agusto & Co., a Lagos-based pan-African agency, assigned a “B+” rating to the Republic of Kenya that expires on September 30, 2025 through a statement on its website.
“The rating reflects our opinion on Kenya’s resilient gross domestic product (GDP) growth expectation precipitated by improved performance in most sectors of the economy and global trade. We also positively note that the Country’s diverse and dynamic economy is one of the fastest growing in Sub-Saharan Africa with a GDP growth of 5.6% in 2023. The rating is however moderated by a high debt-to-GDP ratio (70.8%) and rising debt service to revenue ratio (58.8%), high annual inflation rate (7.7%) above regulatory threshold and depreciation of the Kenya Shilling in FY 2023. Furthermore, we note that the suspension of the 2024 Finance Bill and inability to raise the expected additional revenue of KES 346 billion will have negative impact on Kenya’s fiscal position and finances in the short to medium term.”
“Agusto & Co. estimates a 5.8% growth in Kenya’s real GDP in FY 2024, driven by strong agricultural performance, a resilient services sector, and industry sector expansion. The agricultural sector’s growth will be supported by adequate rainfall and ongoing seed and fertilizer subsidy programs, which will then provide inputs to the industry sector, particularly food processing industries. Furthermore, the implementation of the country’s affordable housing programme through the housing and settlement agenda, which is a key pillar of the Bottom-Up Economic Transformation model, will help to boost the construction sector. We expect the services sector to remain resilient in FY 2024, bolstered by a thriving tourism sector, given that Kenya continues to host key international forums in addition to being a top tourist destination in East Africa. Kenya also remains a regional technology and logistics hub, and with ongoing ICT reforms such as improved connectivity in public institutions, we anticipate continued growth in financial services, health, and public administration sectors.”
“We expect the easing inflationary pressures in the country to support growth in the short to medium term. Nonetheless, the growth will be hinged on a projected decline in global commodity prices including fuel and a more accommodative monetary policy that supports private consumption and investment. In the near term, we anticipate tight monetary policy and ongoing fiscal policy measures to stabilize exchange rate volatility. However, we expect the withdrawal of the Finance Bill 2024 to negatively impact Kenya’s fiscal consolidation plan, affecting the country’s debt sustainability and budget gap in FY 2024/25. While we view the government’s decision to cut expenditures at all levels positively, it may not significantly improve Kenya’s fiscal position and finances in the short to medium term.”
