CBK hits out at rating agencies over outlook

CBK governor Patrick Njoroge. FILE PHOTO | NMG

By BRIAN NGUGI
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Summary

• The Central Bank of Kenya (CBK) has hit back at recent reports by global rating agencies Standard & Poor’s and Fitch in which they painted a negative outlook on the country’s fiscal position on the back of the Covid-19 led economic downturn.
• CBK governor Patrick Njoroge said Tuesday at a briefing that the two agencies did not capture Kenya's whole economic situation in making their assessments.

The Central Bank of Kenya (CBK) has hit back at recent reports by global rating agencies Standard & Poor’s and Fitch in which they painted a negative outlook on the country’s fiscal position on the back of the Covid-19 led economic downturn.

CBK governor Patrick Njoroge said Tuesday at a briefing that the two agencies did not capture Kenya's whole economic situation in making their assessments, saying the country's "medium-term prospect is much better than being acknowledged" by the reports.

S&P Global Ratings, while lowering its long-term foreign and local currency sovereign credit ratings on Kenya to 'B' from 'B+' with a stable outlook, said the coronavirus pandemic had slowed Kenya’s gross domestic product (GDP) growth significantly and weighed on its already weak public finances.

“From our perspective, the outlook is stronger than is being acknowledged by this ratings agency...I think one should understand the fiscal direction," said Dr Njoroge.

“We found it a bit surprising because our projections for 2021 are quite high. The Treasury had a growth estimate of seven per cent, we had 8.3 per cent and the IMF had 7.6 per cent.

On its part, Fitch has affirmed Kenya's 'B+' rating but assigned it a negative outlook, saying this reflects underlying weaknesses of public finances and the uncertain pace of planned fiscal consolidation.

The two separate moves by Fitch and S&P Global Ratings mean that the country will find it more expensive to tap credit on the international market.

International lenders such as sovereign wealth funds, pension funds and hedge funds use the credit ratings to gauge the credit risk of a country, with interest demands going up the lower a country’s ratings fall.

Kenya is planning a foray into the international debt market before the end of the fiscal year to fill its budget deficit, with the possibility of taking on another Eurobond.