Kenya has demonstrated resilience against external economic shocks, particularly from the Middle East crisis and its impact on fuel prices. The country's usable foreign currency reserves remain strong, holding above five months of import cover at approximately $13.14 billion. Its current account deficit has seen a moderate increase to 2.6% of GDP but is still considered narrowed significantly compared to previous periods. The Kenya shilling has also maintained stability, trading within a narrow range of 129 to 130 units against the US dollar.
Moody's, a sovereign credit ratings agency, affirmed Kenya's long-term foreign currency sovereign credit rating at "B3" in January, upgrading it from "Caa1." This stability, along with single-digit Eurobond yields, indicates a lower risk of debt default. David Rogovic, Vice President and Senior Credit Officer at Moody's Ratings, highlighted Kenya's strong entry into the shock, characterized by a narrowed current account and a stable exchange rate, which has helped the central bank manage inflation. Despite an expected moderation in growth for 2026 to 4.9% (CBK) or 5% (National Treasury) and a wider fiscal deficit of 6.4% in the current fiscal year, Kenya has diverse funding options, including a forthcoming $750 million loan from the World Bank's Development Policy Operations and access to international capital markets.
However, Kenya is not entirely immune to the global economic environment; inflation rose to 6.7% in May, up from 5.6% in April, largely due to increased fuel costs stemming from the Iran war. This spike exceeded economist forecasts and led to protests. The country remains in discussions with the IMF for a new funded program, although it is nearing its quota limit for IMF access.
In separate but related financial news demonstrating market activity, the Republic of Congo successfully re-entered the Eurobond market, raising $700 million. This move aimed to take advantage of lower borrowing costs, issuing new notes maturing in 2035 at a yield of 11.625%, which is a significant improvement compared to the 13.7% yield of its previous $930 million debt issuance in November. The interest rate on the new debt is 9.5%, down from 9.875% for the November bonds.
