Fitch affirms Kenya’s IDR as economy sees significant positives - CNBC Africa

Fitch affirms Kenya’s IDR as economy sees significant positives

East Africa

by Elayne Wangalwa 0

Fitch also affirmed the country’s sovereign ratings at B+ and BB- respectively. PHOTO: ultimaora.net

The international credit rating agency has also affirmed the country’s sovereign ratings at B+ and BB- respectively, with stable outlooks.

“The stable outlook reflects Fitch's assessment that upside and downside risks to the ratings are currently well-balanced,” Fitch said.

The key drivers behind the agency's decision was the country’s economic growth rate, the positive bearing of global oil prices and the country’s debt-to GDP ratio, which is above B median, among other factors.

(READ MORE: Kenya optimistic after revised GDP)

“There are significant positives going for the Kenyan economy and while deficit is a concern, most of it is increasingly going to develop key and necessary maritime, road, rail, ICT and airport infrastructure,” Standard Investment Bank research analyst, Eric Musau told CNBCafrica.com.

"Measures to collect more revenues for the Exchequer are also starting to fall into place with the recent reintroduction of capital gains tax at a modest five per cent rate."

Musau added that a key policy change is the acceleration in foreign commercial borrowings with 2015/2016 accelerating to three billion US dollars from 2.75 billion US dollars.

"Eventually, this could pose a risk to the economy if not well managed," he said.

According to Fitch, the main factors that could trigger negative rating action against East Africa’s biggest economy is a significant weakening in public finances, a dwindling of the macroeconomic policy framework and insecurity, among others.

As the as the country's economy continues to grow, driven by mega infrastructure projects like the Standard Gauge Railway, which is anticipated to contribute 1.5 per cent to the country’s GDP, Fitch also anticipates Kenya’s real GDP growth to be around six per cent on average, in the medium term.

(READ MORE: Kenya says GDP grew 5.5 pct in third quarter 2014)

“From a growth perspective, we like the spending direction by national and the county governments, which helped by the private sector will lead the country achieve a robust GDP growth performance for 2015,” Musau said.

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