By The Weekly Vision Business Desk
Kenya’s credit outlook has remained stable after S&P Global Ratings retained the country’s sovereign rating at B, though the international ratings agency has warned that growing fiscal pressures could complicate efforts to stabilise public finances ahead of the 2027 General Election.
While maintaining the rating, S&P cautioned that Kenya’s budget deficit could widen well beyond government projections, reflecting challenges around revenue collection, rising debt-servicing costs and increased public spending. The agency estimates the fiscal deficit could expand to 7.1 per cent of Gross Domestic Product (GDP) in the 2026/27 financial year, compared with the Treasury’s target of 5.5 per cent.
S&P attributed the expected deterioration to several factors: weaker-than-anticipated revenue performance, higher interest payments on public debt, and increased government expenditure associated with the election cycle. The agency also pointed to global uncertainties, including economic disruptions linked to conflict in the Middle East, which have driven up import costs and added further pressure on government finances.
The warning comes as the government faces pressure to balance development spending, debt obligations and demands for lower taxation ahead of the 2027 polls. Alongside the fiscal concerns, S&P revised down Kenya’s 2026 economic growth projection to 4.9 per cent, from an earlier estimate of 5.1 per cent, and adjusted its current account deficit outlook to approximately 3 per cent of GDP — reflecting continued pressure from imports, particularly energy costs. The revisions underline the challenges facing an economy that has shown resilience but remains vulnerable to external shocks and domestic fiscal constraints.
Despite the concerns over public finances, S&P noted that Kenya’s external position has strengthened, offering some support for economic stability. Foreign exchange reserves have improved to about USD15.2–15.3 billion, equivalent to roughly 6.3 months of import cover. The stronger reserve position has been supported by privatisation proceeds, recovering tourism earnings, continued remittance inflows and increased foreign portfolio investment — buffers that have helped stabilise the shilling and given the country greater capacity to absorb external shocks.
S&P’s decision to maintain Kenya’s B rating reflects confidence in the country’s ability to manage its economic obligations despite mounting challenges. However, the warning over rising deficits highlights the delicate balance facing policymakers as they approach the 2027 election period. The government’s ability to contain expenditure, improve revenue collection and maintain investor confidence will be closely monitored as Kenya navigates competing demands of economic growth, debt sustainability and political pressures.
