S&P Global shows little sign that it will match a move by Moody’s and downgrade Kenya, saying its rating could stay where it is as long as political uncertainty didn’t disrupt the running of the country. Kenya, which is also in the process of a international bond roadshow, was dealt an untimely blow on Tuesday when Moody’s cut its rating by one notch on worries about rising debt and worsening debt affordability.
That moved the rating one step lower than S&P’s “B+” rating, but the S&P Kenya analyst, Gardner Rusike, said on Wednesday his firm’s next review of the country, scheduled for March, may conclude that not enough has changed there to move the dial.
There will be discussions on the political outlook, Rusike said, and whether the protests that erupted after Kenyan President Uhuru Kenyatta’s re-election have had any real effects on the day-to-day running of the country.
“Our view is that the political developments by themselves have no immediate impact on the rating as long as the government remains functional and running the country,” he said.
“The challenge is if the tensions were to continue for a prolonged period or to escalate, then that could have a negative impact on investment and perhaps to the pace of economic growth.”
S&P also has a “stable” outlook on its Kenya rating, which would normally make an actual downgrade unlikely. At the margin, the country’s finances are continuing to deteriorate, Rusike said. Moody’s cited debt levels rising to 61 percent of annual gross domestic product as one reason for its downgrade.
“The main credit issue for us in Kenya is the ability for the country to grow on a much higher pace, which would then help with fiscal consolidation and debt stabilisation,” Rusike said.
But “given the current environment, it is most likely that the slow pace of growth will result in a slower pace of fiscal consolidation,” he said, adding that Nairobi’s forecasts of 5.8 percent growth this year “may be on the high side”.