The African Peer Review Mechanism (APRM), a specialized governance review agency under the African Union (AU), has sharply criticized Moody’s recent upgrade of Kenya’s credit rating from negative to positive, terming the move “irresponsible” and “premature.”
Moody’s, a global credit rating agency, revised Kenya’s outlook on Friday, citing reduced liquidity risks and improving debt affordability. However, APRM countered this assessment, arguing that the agency failed to consider critical factors such as final spending allocations, the 2024 Finance Bill, midterm review data on the Appropriation Bill, and other domestic economic conditions.
APRM emphasized that Moody’s had previously downgraded Kenya in July 2024 due to anti-government protests between June and August. The protests, characterized by nationwide unrest over economic grievances, had significant fiscal repercussions. According to APRM, Moody’s decision to now reverse its rating was speculative and lacked a comprehensive review of Kenya’s domestic financial landscape.
Highlighting a pattern of perceived errors in Moody’s assessments, APRM referred to the agency’s January 2023 downgrade of Nigeria’s credit rating from B3 to Caa1, which the Nigerian government vehemently challenged as inaccurate. Moody’s later revised Nigeria’s outlook back to positive in December 2023, attributing the reversal to better-than-expected economic policy developments under the new administration.
The AU agency argued that such premature rating actions can have detrimental effects, including Eurobond sell-offs and destabilization of African economies. “Rushed and speculative analyses risk significant financial losses and undermine Africa’s economic stability,” APRM warned.
The debate over Kenya’s credit rating has sparked widespread discourse. While some experts argue that the positive rating still leaves the country vulnerable to credit risks, President William Ruto welcomed the report, describing it as an indication of Kenya’s improving economic prospects. “We are doing well,” Ruto affirmed, sharing Moody’s report to bolster confidence in his administration’s economic reforms.
However, APRM remains firm in advising Moody’s to refrain from speculative moves and wait for comprehensive term review data before issuing future ratings. The agency called for patience and greater engagement with local economic contexts to avoid undermining the financial stability of African nations.
Kenya, like many other countries in the region, continues to grapple with economic challenges, including rising debt and liquidity constraints. Whether Moody’s positive outlook will translate into tangible improvements remains a subject of close scrutiny.
