The African Peer Review Mechanism (APRM) has raised concerns over recent credit rating actions by Moody’s, calling them irresponsible to Kenya’s economy.
In a statement on Tuesday, January 28, the APRM highlighted errors in Moody’s assessment of Kenya’s creditworthiness.
“The APRM notes with concern the errors in recent credit rating actions by Moody’s. On 24 January 2025, Moody’s changed Kenya’s outlook from ‘negative’ to ‘positive’ and reaffirmed its Caa1 rating, citing a potential ease in liquidity risks and improving debt affordability over time,” the statement read.
Additionally, the APRM pointed out that it is highly unusual for a credit rating agency to bypass a stable outlook when upgrading a country’s rating.
According to the APRM, this move essentially admitted that the previous “negative” rating was an error.
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"It is rare for a credit rating agency to move from ‘negative’ to ‘positive’, skipping a ‘stable’ outlook. The change is an admission, in remedy, that a negative outlook was an incorrect rating. This rating action was a reversal of Moody’s premature rating action on 08 July 2024 which was largely driven by protests in Kenya over the proposed Finance Bill," the statement added.
APRM also criticized Moody’s for its earlier downgrade of Kenya’s credit rating on July 8, 2024, which it described as a rushed decision influenced by nationwide protests against the proposed Finance Bill.
"The July 2024 rating downgrade by Moody’s was speculative, as midterm review data on the Appropriation Bill, the spending allocations, the final budget, the finance bill, and the new cabinet had not yet been released when the rating agency made its announcement. This is not the first time Moody’s has acted prematurely and erred in its analysis," the statement further read.
The organization accused Moody’s of repeatedly acting prematurely in its analysis of African economies, leading to unnecessary financial strain on governments.
To prevent further economic disruptions, the APRM urged Moody’s to adopt a more careful and evidence-based approach when assessing African economies.
"The APRM views such rating actions as irresponsible and detrimental, leading to unnecessary costs to governments, triggering Eurobond sell-offs, and sustaining a negative sentiment on African instruments.
"Moody’s is strongly encouraged to be diligent and wait for the complete term review data before taking rating actions rather than taking speculative and premature rating actions based on missing or incomplete information," the statement concluded.
APRM is a voluntary self-monitoring initiative established in 2003 to enhance governance among African Union member states by assessing their performance in democracy and political governance, economic governance and management, corporate governance and socio-economic development.
In their findings released on Friday, January 24, Moody's noted that Kenya currently stands a high chance of highly reducing liquidity risks and improving debt affordability.
"Domestic financing costs have started to decline amid monetary easing and could continue if the government sustains its more effective management of social demand and fiscal consolidation," the report read in part.
The reports noted that if President William Ruto's administration continues the course, Kenya will increase its credit score and easily attract funding.
"Such a track record would also boost Kenya's access to concessional and commercial external funding. Revenue collection efforts, if successful, present the potential for further improvements in debt affordability, although Kenya has struggled to expand revenue significantly and durably in the past, notwithstanding recent measures," the report added.
