Kenya's debt tightrope just got a little less wobbly, but Fitch Ratings isn't impressed enough to kick the country out of junk territory. The agency affirmed Kenya's ‘B-‘ rating on January 23, 2026, maintaining its stable outlook. Translation: still junk, just stable junk.
Kenya stays stuck in junk bond status despite improved reserves—Fitch's stable outlook means reliably mediocre, not actually good.
The good news? Forex reserves hit KSh 1.60 trillion (US$12.4 billion) by end-2025, powered by portfolio inflows, official loans, exports, tourism, remittances, and central bank purchases. That's enough to cover four months of external payments in 2026. Not bad for a country that's been sweating bullets over debt repayment. Reserves rebuilt sharply despite external pressures, which Fitch cited as a positive factor.
Kenya also played some smart financial chess. The government partially refinanced its KSh 129.0 billion 2028 Eurobond in October 2025 and its KSh 116.1 billion 2027 Eurobond in February 2025.
Then it converted Export-Import Bank of China dollar debt to renminbi with better terms, saving roughly 0.1% of GDP annually. Small wins, but wins nonetheless.
Now the ugly part. Kenya's fiscal deficit is projected at 5.8% of GDP for FY26, blowing past both the 4.7% budget target and the ‘B' median of 3.5%.
FY25 saw a brutal 2.6 percentage point slippage from the initial budget. Revenue collection in the first half of FY26 undershot targets by 0.9% of projected GDP, while spending overshot by 0.6%.
Total revenue is forecast at just 17.2% of GDP, below the 17.4% target and way under the ‘B' median of 18.7%.
Debt service tells the rest of the story. External debt service climbs to KSh 684.0 billion (3.7% of GDP) in FY26 from KSh 645.0 billion in FY25. It moderates briefly in FY27 before climbing back above KSh 645.0 billion through FY30.
Kenya's interest-to-revenue ratio? Over 30% in FY26–FY27, double the ‘B' median of 16%. General government debt edges down to 68.6% of GDP by FY27, still above the 54.7% median. The shilling's performance in the foreign exchange market has been crucial in determining Kenya's ability to meet these external obligations. Like South Africa's SARB, the Central Bank of Kenya has used monetary policy decisions to influence currency stability and support reserve accumulation.
External financing needs nearly KSh 774.0 billion (4% of GDP) in FY26. No IMF program expected, either. Kenya's central bank has been actively managing forex trading operations to maintain the shilling's stability and build up its reserve buffer against external shocks.
