Moody's downplays Kenya's credit rating after gov't drops tax bill-Xinhua

Moody's downplays Kenya's credit rating after gov't drops tax bill

Source: Xinhua| 2024-07-09 22:29:15|Editor: huaxia

NAIROBI, July 9 (Xinhua) -- Global rating agency Moody's has cut Kenya's sovereign credit ratings, citing "diminished capacity to maintain revenue-based fiscal consolidation that would improve debt affordability and place debt on a downward trend."

Moody's said the downgrade places Kenya's foreign-currency long-term issuer ratings and foreign-currency senior unsecured debt ratings to Caa1 from B3, with the country's outlook remaining negative.

"In particular, the government's decision not to pursue planned tax increases and instead rely on expenditure cuts to reduce fiscal deficit represents a significant policy shift with material implications in Kenya's fiscal trajectory and financing needs," Moody's said in a statement released on Monday evening.

The statement came after Kenyan President William Ruto was forced to withdraw new taxes in the Finance Bill 2024 following three weeks of public protests.

The government had sought to raise an additional 346.7 billion Kenyan shillings (about 2.7 billion U.S. dollars) to fund its 31-billion-dollar budget for the financial year 2024/2025.

The credit rating agency said it does not expect the government to introduce significant revenue-sharing measures in the foreseeable future, thus expecting Kenya's fiscal deficit, estimated at 4.66 billion dollars, to narrow slowly, with the country's debt affordability remaining weaker for long.

Negative ratings by global credit agencies hurt Kenya's chances of attracting cheaper loans from the international market, the National Treasury of Kenya noted in a recent report.

The country's public debt stood at 11.3 trillion shillings (about 88 billion dollars) at the end of March, according to the National Treasury. The institution had targeted to push the fiscal deficit to 3.3 percent of the gross domestic product in the 2024/2025 fiscal year from 5.7 percent in the financial year 2023/2024.