Kenya’s economic reforms: Markets don’t lie

Over the past decade, since issuing our first Eurobond in 2014, Kenya’s sovereign spreads against US Treasuries have averaged between five and six percent, at times shooting higher when investor confidence wavered. In those years, the narrative of debt distress often dominated discussions around Kenya’s economy.

Today, however, the picture looks different. Recent transactions show our spread has compressed to around four percent. For a country that faced intense scrutiny just a few years ago, this narrowing of spreads is not just a statistic; it is a signal.

Spreads are not abstract numbers; they are the clearest measure of how the world perceives our risk. When investors demand fewer basis points to hold Kenyan debt, they are effectively saying: we believe in your direction, your policies, and your discipline.

Markets are impartial. They are not swayed by press releases or political promises. They respond only to credibility, consistency, and performance. At issuance in 2014, Kenya’s debut Eurobond came at a spread of roughly seven per cent.

At that time, it was seen as a breakthrough, proof that Kenya had entered the global debt markets with strength. Yet as years passed, questions around fiscal deficits, rising debt stock, and external shocks cast a shadow.

The market, in turn, priced in higher risk. That is why today’s compression is significant. It tells us that the reforms underway, while not always visible in headlines, are restoring trust.

That story of renewed confidence has now been reinforced by independent arbiters. In January 2025, Moody’s upgraded Kenya’s outlook from negative to positive, reflecting improved debt affordability and decreasing liquidity risks. In the same month of January, Fitch also affirmed Kenya’s B- rating with a stable outlook.

In August 2025, S&P Global Ratings upgraded Kenya’s sovereign credit rating from B- to B, citing easing liquidity risks and improved market access. These upgrades are more than a technical adjustment.

It is a powerful signal to investors that Kenya’s reforms are credible and sustainable. For a global ratings agency to revise Kenya upwards, after years of concern about fiscal pressures, is confirmation that progress is real and recognised.

This recovery in confidence is no accident.

At the centre of it lies the Broad-based Economic Transformation Agenda (BETA).

By prioritising agriculture, micro and small enterprises, digitalisation, housing, healthcare, and climate action, the government is laying the foundations of an economy built on productivity and resilience. Investors are watching these shifts closely. The fiscal side is equally critical.

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Hard choices have been made to consolidate spending, broaden the tax base, and align public finances with long-term sustainability.

These measures are never popular in the short run. But in the cold logic of capital markets, they matter profoundly. They are the difference between being seen as a high-risk borrower and being treated as a credible issuer.

Part of this story is indeed shaped by global conditions. US Treasury yields, after climbing steeply in 2022–23, have moderated somewhat, offering relief to emerging markets across the board. But the Kenyan case is not just about global tailwinds.

Even after adjusting for external factors, our spreads have compressed more sharply than those of many peers. That relative performance reflects something deeper: a recognition that Nairobi is actively managing risks rather than being overwhelmed by them.

The tightening Eurobond spread or a ratings upgrade has meaning for the ordinary Kenyan. Lower spreads reduce the government’s cost of borrowing, freeing up fiscal space for critical investments in schools, hospitals, infrastructure, and climate adaptation.

They ease pressure on domestic credit markets, meaning businesses and households are less crowded out by government borrowing.
And they send a signal to private capital, foreign direct investment, portfolio inflows, and diaspora investors, that Kenya remains a safe and rewarding place to put money to work.

The task now is to consolidate these gains. That means staying the course on fiscal discipline, accelerating reforms that unlock private sector growth, and deepening domestic resource mobilisation. It means using BETA not just as a policy document but as a compass for mobilising investment and delivering inclusive growth.

Kenya is still in discussions with the International Monetary Fund for a new programme. Such engagement will add an additional layer of assurance. But the truth is this: even before a deal is struck, markets are already voting with their money, a vote that is a resounding expression of confidence.

In short, what happens in trading rooms in New York, London, and Dubai eventually touches the price of bread, the cost of fuel, and the availability of credit in Nairobi, Eldoret, and Kisumu.

Those with concerns will rightly remind us that challenges remain: public debt is still high, global conditions volatile, and domestic reforms uneven. These are realities we do not deny. But here is the unavoidable fact: markets are rewarding progress.

And markets, unlike politics, cannot be stage-managed. A cautious observer may distrust government rhetoric. But they cannot dispute the numbers flashing on trading terminals.

They cannot argue against spreads narrowing by hundreds of basis points. They cannot dismiss an S&P upgrade driven not by goodwill but by hard data. These are not signs of complacency, they are signs of momentum.

Dr Chris Kiptoo is the Treasury Principal Secretary.