Nairobi — Moody's Ratings has upgraded Kenya's sovereign credit rating from B3 to Caa1, citing a decline in near-term default risk supported by stronger external liquidity and improved access to international capital markets.
In its latest review, the global rating agency said the upgrade reflects a marked strengthening of Kenya's foreign-exchange reserves, a narrower current account deficit and more stable shilling developments that have eased balance-of-payments pressures and expanded the government's funding options.
"The upgrade to Caa1 reflects our view that Kenya's near-term default risk has declined, supported by stronger external liquidity and improved funding flexibility," Moody's said.
The agency noted that Kenya has returned to external bond markets, using the proceeds to smooth its external debt maturity profile and reduce near-term refinancing risks.
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International reserves rose to $12.2 billion by the end of 2025, equivalent to 5.3 months of import cover, up from $9.2 billion a year earlier, providing a stronger buffer against external shocks.
Over the same period, the current account deficit narrowed sharply to 1.3 percent of GDP in 2024, supported by higher diaspora remittances, stronger exports and an expanded services surplus.
Moody's also pointed to Kenya's successful re-entry into global capital markets, where the government raised $3 billion through Eurobond issuances in 2025.
Part of the proceeds was used to buy back $1.2 billion of bonds maturing between 2026 and 2028, effectively pushing the next major Eurobond maturity to 2030 and easing immediate refinancing pressure.
Despite the upgrade, the ratings agency said Kenya's credit profile remains constrained by weak debt affordability, elevated interest costs and limited progress on fiscal consolidation.
Large fiscal deficits projected to remain close to 6 percent of GDP continue to heighten sensitivity to shifts in financing conditions, particularly given the government's heavy reliance on domestic borrowing.
Moody's revised the outlook to stable from positive, reflecting expectations that recent improvements in external liquidity and financing conditions will be sustained, even as structural fiscal challenges persist.
