Moody's cuts Kenya debt rating further into junk
Moody's said it has downgraded Kenya's debt rating further into junk territory and warned that the outlook for the country remained negative.
The move comes after President William Ruto last month scrapped a controversial finance bill aimed at boosting tax revenue, in the face of widespread protests by young Gen-Z Kenyans.
The US-based ratings agency said in a statement on Monday it was cutting the ratings for Kenyan government debt to Caa1 from B3, a move that is likely to increase borrowing costs for the cash-strapped government.
"The downgrade of Kenya's rating reflects significantly diminished capacity to implement revenue-based fiscal consolidation that would improve debt affordability and place debt on a downward trend," Moody's said.
"In particular, the government's decision not to pursue planned tax increases and instead rely on expenditure cuts to reduce the fiscal deficit represents a significant policy shift with material implications for Kenya's fiscal trajectory and financing needs."
Ruto announced on June 26 that he was withdrawing the finance bill that was aimed at raising a further $2.7 billion after peaceful protests over the tax hikes degenerated into deadly violence.
Last Friday, he said the government now had to borrow more and cut spending further to compensate for the lack of the extra tax revenue.
Kenya's public debt amounts to some 10 trillion shillings ($78 billion), around 70 percent of gross domestic product.
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