{"id":7410,"date":"2020-05-08T23:03:19","date_gmt":"2020-05-08T23:03:19","guid":{"rendered":"https:\/\/www.africa-press.com\/kenya\/?p=7410"},"modified":"2020-05-08T23:03:19","modified_gmt":"2020-05-08T23:03:19","slug":"bad-borrowing-habits-come-to-haunt-kenya","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya","title":{"rendered":"Bad borrowing habits come to haunt Kenya"},"content":{"rendered":"

AfricaPress-Kenya:<\/strong> A global agency Moody\u2019s yesterday changed the outlook of Kenya\u2019s credit worthiness to negative, citing the country\u2019s massive debt obligations.<\/p>\n

By changing the outlook from stable to negative, the US-based rating agency has essentially raised a red flag on the possibility of Kenya defaulting on its debt.The revision signals that Kenya\u2019s B2 rating could be revised to B3, which would see it find itself in the company of fiscal miscreants such as Ghana which nearly defaulted on one of its external loans.<\/p>\n

\u201cMoody\u2019s would likely downgrade the rating if it were to conclude that the ongoing deterioration in Kenya\u2019s debt burden and debt affordability was likely to exacerbate liquidity risks, raising questions over the State\u2019s ability to refinance maturing debt,\u201d said Moody\u2019s.<\/p>\n

It, however, maintained Kenya\u2019s B2 status – a junk bond which is better than B3 – citing \u201cfundamental economic strengths including a relatively large and diversified economy with high growth potential and quite deep domestic financial markets.<\/p>\n

\u201dMoody\u2019s said it changed the outlook to negative due to the country\u2019s huge debt obligations including pressure to spread out payment of its external loans and refinance (borrow to repay) short-term domestic loans.<\/p>\n

\u201cThe negative outlook reflects the rising financing risks posed by Kenya\u2019s large gross borrowing requirements, which include amortisation of external bilateral debt and the need to refinance large stock of short-term debt,\u201d said Moody\u2019s in a statement.<\/p>\n

Kenya is also facing high exchange and interest rates, making it difficult to finance its budget. \u201cWhile Kenya does not face acute financing pressures, the severe tightening of financial conditions will challenge its ability to meet larger gross financing needs without an increase in borrowing costs that would threaten medium-term fiscal consolidation,\u201d explained Moody\u2019s.<\/p>\n

\u201cWeaker growth and larger fiscal deficits will further aggravate Kenya\u2019s already high-debt and interest burdens,\u201d said Moody\u2019s, reckoning that coronavirus outbreak is creating a severe and extensive credit shock across many regions and market.<\/p>\n

Moody\u2019s ambivalent position is anchored on expectations that Kenya will not participate in any debt relief initiative that requires the participation of private-sector creditors, which could carry further negative implications for the country\u2019s rating.<\/p>\n

It expected Kenya to generally meet all its debt service commitments to private-sector creditors, who include commercial banks, hedge funds and pension fund who hold the country\u2019s three Eurobonds.<\/p>\n

Moody\u2019s review comes at a time when Kenya\u2019s revenues have been eroded by the Covid-19 pandemic, whose containment measures have muted most economic activities.Moreover, the Government has offered some tax incentives which have seen it forego over Sh175 billion in revenues.<\/p>\n

A negative rating would make it harder for Kenya to attract foreign investors who are keen to put their money in low-risk economies.<\/p>\n

Moody\u2019s announcement came a day later after Kenya\u2019s forex reserves were boosted by Sh78 billion credit from the International Monetary Fund. They were to be used for the balance of payment requirements – such as paying debt and acquiring medical resources to fight Covid-19.<\/p>\n

Kenya has been under pressure to reschedule domestic loans that will be falling due in 30 days, with the total public debt standing at Sh6.3 trillion by the end of March.National Treasury Cabinet Secretary Ukur Yatani had not responded to our queries by the time we went to press.\u00a0In 2017, when Moody\u2019s indicated that it would cut Kenya\u2019s rating from B1, the then Treasury CS Henry Rotich dismissed it as \u201cdesk analysis.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

AfricaPress-Kenya: A global agency Moody\u2019s yesterday changed the outlook of Kenya\u2019s credit worthiness to negative, citing the country\u2019s massive debt obligations. By changing the outlook from stable to negative, the US-based rating agency has essentially raised a red flag on the possibility of Kenya defaulting on its debt.The revision signals that Kenya\u2019s B2 rating could […]<\/p>\n","protected":false},"author":84,"featured_media":7406,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8],"tags":[3399,3422,2387],"class_list":["post-7410","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","tag-international-monetary-fund","tag-moodys","tag-ukur-yatani"],"yoast_head":"\nBad borrowing habits come to haunt Kenya - kenya<\/title>\n<meta name=\"description\" content=\"A global agency Moody\u2019s yesterday changed the outlook of Kenya\u2019s credit worthiness to negative, citing the country\u2019s massive debt obligations.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bad borrowing habits come to haunt Kenya\" \/>\n<meta property=\"og:description\" content=\"A global agency Moody\u2019s yesterday changed the outlook of Kenya\u2019s credit worthiness to negative, citing the country\u2019s massive debt obligations.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya\" \/>\n<meta property=\"og:site_name\" content=\"kenya\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2020-05-08T23:03:19+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/eritrea\/sites\/28\/2020\/05\/apsvaxk2irm0wt5eb58f8900048.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"533\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/kenya\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Bad borrowing habits come to haunt Kenya\",\"datePublished\":\"2020-05-08T23:03:19+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya\"},\"wordCount\":595,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/eritrea\/sites\/28\/2020\/05\/apsvaxk2irm0wt5eb58f8900048.jpg\",\"keywords\":[\"International Monetary Fund\",\"Moody\u2019s\",\"Ukur Yatani\"],\"articleSection\":[\"all news\",\"economy\",\"homepage-english\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya\",\"url\":\"https:\/\/www.africa-press.net\/kenya\/economy\/bad-borrowing-habits-come-to-haunt-kenya\",\"name\":\"Bad borrowing habits come to haunt Kenya - 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