Joshua Masinde
24 December 2011
Kenya venture to borrow money in the international market got a boost on Friday after an international credit rating agency gave the country a stable outlook.
Standard and Poor’s, however, warned it could change its rating if political tensions were to flare up.
The favourable rating was made despite the recent turbulence in the foreign exchange market which saw the shilling oscillate between Sh107 against the dollar and Sh83 in less than two months.
Inflation has also edge up to hit a high of 18.75 per cent in November and economic growth for the three months to September 2011, slowed down to 3.5 down from 5.75 reported over a similar quarter last year.
In a statement which left the county’s sovereign credit rating unchanged at the 2010 level, the Standard and Poor’s noted that stable outlook reflects its expectation of continued political stability, fairly resilient economic growth, improving inflation performance, and continued moderately high deficits, but with more spending on growth-enhancing infrastructure investment.
Last week, Treasury issued invite to international banks to lend it about Sh54 billion ($600 million) to fund budgetary expenditure.
The loan will help plug Kenya’s funding deficit and ease liquidity pressure from the domestic market.
Lending market
Sovereign rating are revered in the global lending market with a downgrade swiftly followed by investors demanding higher interest rate on their funds as it is taken as an indicator of increased risk.
The rating agency recently run in to trouble after it downgraded US, with the Obama administration calling for investigations into its operations.
“We could lower the ratings if political tensions were to flare up, significant currency pressures were to re-emerge, or fiscal or monetary performance were to deteriorate significantly,” Standard and Poor’s said of Kenya’s outlook.
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