Treasury shrugs off credit downgrade by global ratings agency

In response to Moody’s recent downgrade of Kenya’s credit rating, National Treasury Permanent Secretary, Chris Kiptoo, has expressed confidence that the liquidity situation will soon improve.

Kiptoo announced that Kenya is expecting a substantial injection of cash into the economy starting this week, which will help ease liquidity constraints.

During a media briefing, Kiptoo assured investors and stakeholders that the current financial situation is not dire, citing the expected influx of funds.

Economic support

“Things are not badly off, we expect this week to get $3 billion, and before the end of this month, we expect another $1 billion from the International Monetary Fund (IMF),” he stated.

The Africa Export and Import Bank (Afrexim Bank) promised recently to start the disbursement of a $3 billion (Sh411.30 billion) economic support loan for Kenya, handing some temporary relief to the country facing deep financial headwinds. Moody’s, a global ratings agency, downgraded Kenya’s senior unsecured debt rating, as well as its long-term foreign-currency and local-currency issuer ratings from B2 to B3 on Friday. The agency attributed the rating downgrade to the increased liquidity risks faced by the government.

In a statement, Moody’s highlighted the deterioration of Kenya’s domestic funding conditions over the past two months. The agency noted that the country’s net domestic issuance had significantly decreased, leading to financing shortfalls and delays in government spending.

“The rating downgrade is driven by an increase in government liquidity risks,” the agency said.

The additional funds are expected to alleviate the pressure on the government’s finances and support various development initiatives.  The liquidity boost will enable the government to meet its financial obligations promptly, stimulate economic growth, and advance key sectors such as infrastructure, healthcare, and education.

Moody’s downgrade, however, serves as a reminder of the challenges that Kenya faces in managing its finances effectively. The agency’s assessment highlights the importance of maintaining robust domestic funding conditions and ensuring timely government spending to mitigate liquidity risks.

– John Otini