Kenya's capital city, Nairobi. The raise from a B rating by Standard & Poors may result in the country paying less for long-term borrowing. Photo/FILE
Kenya’s credit rating has gone up thanks to reduced political risk.
Greater political cooperation leading to promising reforms was cited by a top international credit-rating agency in lifting Kenya’s grade on Friday to a B+.
The raise from a B rating by Standard & Poors may result in the country paying less for long-term borrowing. The upgrade also brings Kenya closer to a score that foreign investors regard as an all-clear signal.
“The raising of the sovereign credit rating on Kenya reflects our view of the country’s falling political risks in the wake of the adoption of a new constitution, as well as the country’s improved economic outlook,” said Mr Ravi Bhatia, an analyst for Standard & Poors in London.
Mr Bhatia added: “The absence of violence surrounding the referendum supports our view of improving political stability in Kenya.
“In addition, against the troubled background of post-election violence in 2008, we believe it is noteworthy that politicians on opposite ends of the political spectrum co-operated and agreed on the compromise draft constitution text.”
A further upgrade could come if S&P perceives “an extended period of political and economic stability.” But the agency also warned of risks of a renewed political stalemate.
In its new assessment of Kenya’s creditworthiness, the firm noted that many provisions of the new Constitution require legislative action to take effect. And “this could fall subject to political in-fighting”.
S&P presented a bullish view of the country’s economy as well. It predicted that GDP would grow at a 5.4 per cent rate next year.
“Kenya benefits from a sophisticated domestic debt market,” the agency added. Fitch Ratings also raised Kenya’s grade to a B+ in August.
In reporting on the S&P action, The Wall Street Journal noted that Kenya’s coffee industry is “set to benefit from tight world markets during the coming growing season.” It added that “the nation’s long-suffering sugar sector may become competitive before Kenya removes import restrictions in 2012.”
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