Moody’s rating boosts Kenya’s credit outlook: What It means for you

On 24th January 2025, big news about Kenya came from New York. Moody's, a global credit ratings agency, revised the country’s credit outlook from “negative” to “positive”.

This is a critical report card for Kenya because it means the country has kept its promise to pay back debts on time and in full, following years of intermittent poor economic fundamentals leading to the negative ratings.

When lenders feel safe to lend, it means lower borrowing costs and a better outlook for a stable economy. When borrowing interest rates are low, the ripple effect is a decline in domestic financing costs, easing Kenya’s liquidity risks and making it cheaper for Kenyans to borrow money within the country.

Moody's rating is essentially a vote of confidence in Kenya's economy. This is good news for Kenyans because debt affordability leads to a decline in domestic financing costs, and monetary easing could lead to increased investment in the country, creating jobs and boosting the economy.

This did not happen by chance or by accident. The transformative economic measures rolled out by President William Ruto are bearing fruits despite the scepticism that has clouded the public arena and the digital space. The bottom-up transformative agenda (BETA) which includes amongst other economic interventions like taming inflation, lowering the cost of credit and increased social support in health and education.

The journey towards economic stabilization has not been easy, it has been painful and more so because it involved a radical paradigm shift in economic planning and interventions. 

It also involved broadening the tax base, increase of taxes in some areas and also contributory amounts in social programmes like the National Social Security Fund (NSSF) and  Social Health Authority (SHA).

Do we eat ratings? Does a rating put food on my table? Some might ask. So, who is this Moody anyway? Is it some random person I know named Moody, or that grumpy person you know who always complains about the weather? Fair questions.

The answers to these questions started flowing even before the ratings were published and none other than the Deputy President, Kithure Kindiki ably explained this on 23rd January 2025 while meeting Kajiado county grassroots leaders.

In explaining how the stabilization of the Kenyan shillings against the dollar affects the cost of household goods in towns like Ilbisil, Isinya and  Sultan Hamud, the DP explained in a simple way how the cost of such items which are mostly imports become expensive when the shilling is weak and vice versa.

Therefore, positive ratings, which is an outcome of sound macroeconomic policies mean the following amongst others. First, Kenya will be able to access affordable external financing meaning that there shall be money to support infrastructure that facilitates value chains such as roads, markets, digital hubs, last-mile power connectivity and aggregation parks.

Secondly, with increased cheaper external financing channels, the government will significantly reduce the appetite for domestic borrowing and therefore local banks will have more money to lend to the private sector and at lower interest rates thus spurring industrialization.

More industries create more jobs, especially for the youth and also strengthen the economic base due to more taxes to the national treasury. With more taxes, the government will be able to expand the social safety nets to the old, the sick and also revamp our educational financing model.

Therefore, Kenya has to sustain its macro-economic intervention measures so as to further boost its ratings as there is a direct relationship between rating and the households’ income.

Poor rating means no access to cheaper external finances or no access at all thus no more money for support infrastructure. The government would also heavily rely on local banks thus less money for the private sector support or expensive loans which means shutting of businesses and loss of jobs.

In a worst-case scenario, extremely poor rating can cause economic collapse.