Moody’s Upgrades Kenya’s Credit Rating as Debt Risk Falls

Kenya has received a lift in its international financial standing.

On January 27, 2026, global credit agency Moody’s upgraded the country’s sovereign credit rating from B3 to Caa1, noting that the risk of Kenya defaulting on its debt in the near term has declined.

Moody’s said the upgrade reflects stronger external liquidity and improved access to international capital markets, which have eased pressure on the country’s finances.

“The upgrade to Caa1 reflects our view that Kenya’s near-term default risk has declined, supported by stronger external liquidity and improved funding flexibility,” the agency said.

Kenya’s foreign exchange reserves have grown significantly, reaching $12.2 billion by the end of 2025. This is enough to cover 5.3 months of imports, up from $9.2 billion a year earlier, giving the country a stronger buffer against external shocks.

The current account deficit also narrowed sharply to about 1.3 per cent of GDP in 2024. This improvement was supported by higher diaspora remittances, stronger exports, and an expanded services sector.

Kenya successfully returned to international bond markets, raising $3 billion through Eurobond issuances in 2025. Part of the funds was used to buy back $1.2 billion of bonds maturing between 2026 and 2028, pushing the next major Eurobond repayment to 2030 and easing short-term refinancing risks.

Despite the upgrade, Moody’s noted that Kenya still faces challenges. Debt affordability remains weak, interest costs are high, and fiscal deficits are expected to stay near 6 per cent of GDP.

Progress on fiscal consolidation has been limited, keeping the country sensitive to shifts in financing conditions.

Moody’s revised the outlook to stable from positive, reflecting the expectation that recent improvements in external liquidity and financing conditions will continue, even as structural fiscal challenges remain.