Fitch Ratings has reaffirmed Kenya’s sovereign credit rating at B- with a Stable Outlook, pointing to stronger short-term external liquidity following a sharp rebound in foreign exchange reserves and recent debt management measures, while cautioning that large deficits and heavy debt servicing continue to weigh on the country’s credit standing.
The agency estimates that gross foreign exchange reserves rose to KSh 1.60 trillion, equivalent to US$12.4 billion, by the end of 2025. The increase was driven by portfolio inflows, official financing, export earnings, tourism receipts, remittances and foreign exchange purchases by the Central Bank. Despite this improvement, Fitch expects the current account deficit to widen slightly to 2.6 per cent of GDP in 2026, from an estimated 2.3 per cent in 2025, reflecting higher imports and rising external interest costs. Even so, reserves are projected to cover about four months of external payments in 2026.
Fitch also affirmed Kenya’s country ceiling at B, one notch above the sovereign rating, and maintained the rating on senior unsecured debt at B- with a Recovery Rating of RR4.
External liquidity pressures have eased after Kenya partially refinanced its 2028 Eurobond in October 2025 and its 2027 Eurobond earlier in February. In addition, part of the country’s US-dollar debt owed to China’s Export-Import Bank was converted into renminbi-denominated liabilities and renegotiated, generating annual savings estimated at around 0.1 per cent of GDP. Fitch noted, however, that while these steps reduced near-term refinancing risks, they did little to change the longer-term debt burden.
Government external debt servicing costs, including interest and principal repayments, are projected to rise to KSh 684.0 billion in FY26, equivalent to 3.7 per cent of GDP, up from about KSh 645.0 billion in FY25. Fitch expects repayments to ease in FY27 before rising again from FY28 through FY30, keeping overall external financing needs elevated.
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Fiscal performance remains the main constraint on the rating. Fitch forecasts a FY26 budget deficit of 5.8 per cent of GDP, well above the government’s 4.7 per cent target and the B-category median of 3.5 per cent. The agency attributed this to continued spending overruns and revenue shortfalls, noting that in the first half of FY26, expenditure exceeded targets while revenue collection fell short. Total revenue is projected at 17.2 per cent of GDP, below both the government’s target and peer-country averages.
Fitch expects deficit financing to lean more heavily on domestic borrowing, limiting the scope for a meaningful fall in yields even as policy rates ease. On the external side, Kenya plans to raise close to KSh 774.0 billion in FY26 through a mix of official and commercial borrowing, with roughly a third expected on concessional terms from multilateral lenders. The agency does not anticipate an IMF programme in FY26 and flagged uncertainty around World Bank disbursements, increasing the likelihood of greater reliance on commercial funding.
Debt affordability remains stretched. Although the interest-to-revenue ratio is expected to ease slightly after peaking in FY25, it is projected to remain above 30 per cent, roughly twice the B-category median. General government debt is forecast to edge down to 68.6 per cent of GDP by FY27, still significantly above peer levels. While the share of foreign-currency debt has declined, reducing exchange-rate risk, interest costs remain elevated.
Fitch said the affirmation reflects a period of stabilisation following Kenya’s downgrade in August 2024. Any upgrade, the agency added, would hinge on sustained fiscal consolidation and a lasting strengthening of external buffers.
