Senior Kenyan officials while making the case for improved credit rating have pointed to comparative data from Mauritius, Botswana and Morocco, three African countries with an investment grade rating.
Such status (Aaa to Baa3, on Moody’s scale) will reduce borrowing costs and attract more capital, both for government and leading corporates.
While future upgrades depend on sustained fiscal discipline, a reduction in the fiscal deficit, and lower interest costs, the objective data shows Kenya performing as well as, or better than, the three comparators. Let us compare the size of economy, debt-to-GDP ratio, economic growth, inflation, fiscal deficits.
Since credit rating is a measure of creditworthiness, size matters, and the amount of current indebtedness, relative to that size. A growing economy has more capacity to repay debt, and the fiscal deficit determines how much a country borrows each year.
Botswana is a $20 billion per year economy, Mauritius is $16 billion, while Morocco is $154 billion. Kenya is at $136 billion. Botswana’s debt-to-GDP ratio is at 28 percent, while Mauritius, Morocco and Kenya are at 87, 70 and 65.5 percent, respectively. While a low ratio is desirable, it means lower leverage.
Kenya has stronger economic growth – 4.5 percent in 2024 – compared to Botswana which was growing at 1 percent and Morocco at 3.3 percent. It was at par with Mauritius at 4.7 percent. Inflation was 2.8 percent in Botswana in 2024.
In Mauritius, it was slightly higher at 3.6, while it was 1 percent in Morocco and 4.5 percent in Kenya. Fiscal deficits were 6.7, 5.8, 4.1 and 5.2 percent of GDP for Botswana, Mauritius, Morocco and Kenya respectively in 2024. The first two are accumulating debt at slightly faster rate than Kenya.
Clearly, Kenya deserves a better rating. However, beyond the quantitative data lies some qualitative interpretations by the rating agencies and, it would appear, citizens.
Both have been cautious in reviewing their assessment of the economy, and its prospects. The ratings agencies are however, changing their views faster than their citizens.
In August this year, S&P upgraded Kenya’s rating to B, from B-. That was good news, and led to an immediate drop in yields on Kenya's Eurobonds. In July, Fitch Ratings affirmed a stable outlook, but maintained their rating at B-, while Moody’s changed their outlook to positive from negative, earlier in the year. Still, Government is aiming for better.
The Institute for Management Development (IMD) agrees with them. Published in June, its 2025 World Competitiveness Rankings, placed Kenya number 1 in Africa, ahead of Botswana, Ghana, South Africa, Nigeria and Namibia.
A well-regarded business school with a footprint in Switzerland, Singapore and China, IMD was founded 75 years ago. Their MBA programme consistently ranks in the top five globally. Their World Competitiveness Center has strong research on how nations and enterprises compete.
The environment in which businesses operate can assist or impede their competitiveness. So the IMD index rates the capacity of countries to create and maintain an environment that sustains the competitiveness of enterprises, both domestically and internationally.
They rate country competitiveness using four main factors: economic performance; government efficiency; business efficiency and infrastructure.
The four factors aggregate 20 sub-factors comprising 341 criteria, which are hard such as GDP, and soft data, which analyses competitiveness as it is perceived (e.g. availability of competent managers). Hard criteria represent two-thirds of the score while the survey data represent one-thirds of the overall score.
To assess economic performance the index looks at the domestic economy, international trade and investments, employment and prices. Government efficiency is assessed by looking at public finance, fiscal policy, institutional framework, business legislation. Business efficiency is measured through productivity and efficiency, labour market, finance, management practices, and attitude and values.
Infrastructure measures a country's basic technological, scientific, health, educational and environmental infrastructure.
Analysts and business executives agree on a better rating for Kenya. Business confidence has improved in recent months, with October’s Purchasing Manager’s Index PMI at 52.5.
November inflation as also eased to 4.5 percent down from 4.6 percent in the previous month.
Public sentiment remains pessimistic. This curtails our actions as economic actors, without which we cannot have money in our pockets.
Me thinks it has to do with the daily, constant diet of negativity that our politicians feed us. Exploiting our biases and the reductions in real wages set off by the covid shutdowns, they have amplified our pessimism and conflict to our detriment.
Ndiritu Muriithi is an economist and partner at Ecocapp Capital. He is also the chairman of KRA and former governor of Laikipia County. Email: [email protected]
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