Global rating agency Moody's has warned of possible downgrade of Kenya's credit scores citing pressure from the country's rising debts.
The agency said it had placed Kenya's B1 rating on review for downgrade due to persistent deficits as high borrowing costs continue to drive government indebtedness higher, among other factors. Moody's expects that Kenya's government debt burden, which has risen to 56.4 per cent of GDP as of June - up from 40.5 per cent five years ago - will continue to rise due to persistently high primary deficits and borrowing costs.
"Pressure on the government's primary balance, which posted a deficit of 5.3 per cent of GDP in the latest fiscal year ending June 2017, comes from elevated development spending and weak revenue performance.
Unless a decisive policy response is introduced, the upward trajectory in government debt will see debt-to-GDP surpass the 60 per cent mark by June 2018," the agency said in a statement.
Moody's noted that due to the erosion in government revenue intake in the last five years and increased recourse to debt from private sources on commercial terms, government debt affordability has deteriorated with statistics showing that in the latest fiscal year the government spent 19 per cent of its revenues on interest payments, up from 10.7 per cent five years ago.
"Focus of the review will be to assess the capacity and willingness of the government to address these budgetary challenges in a comprehensive, effective and timely manner," the agency said.