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A global agency Moody’s yesterday changed the outlook of Kenya’s credit worthiness to negative, citing the country’s massive debt obligations.

By changing the outlook from stable to negative, the US-based rating agency has essentially raised a red flag on the possibility of Kenya defaulting on its debt.

The revision signals that Kenya’s B2 rating could be revised to B3, which would see it find itself in the company of fiscal miscreants such as Ghana which nearly defaulted on one of its external loans.

“Moody’s would likely downgrade the rating if it were to conclude that the ongoing deterioration in Kenya’s debt burden and debt affordability was likely to exacerbate liquidity risks, raising questions over the State’s ability to refinance maturing debt,” said Moody’s.

It, however, maintained Kenya’s B2 status - a junk bond which is better than B3 - citing “fundamental economic strengths including a relatively large and diversified economy with high growth potential and quite deep domestic financial markets.”

Moody’s said it changed the outlook to negative due to the country’s huge debt obligations including pressure to spread out payment of its external loans and refinance (borrow to repay) short-term domestic loans.

“The negative outlook reflects the rising financing risks posed by Kenya’s large gross borrowing requirements, which include amortisation of external bilateral debt and the need to refinance large stock of short-term debt,” said Moody’s in a statement. 

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