Global Rating Agency Warns Ruto, Mbadi Over Costly Loans
2 min read
S&P Global Ratings has warned that Kenya’s budget deficit could rise to 7.1 per cent of GDP in the 2026/27 financial year, putting more pressure on the government as it prepares for the 2027 General Election.
The projected deficit is higher than the 5.5 per cent target set by the National Treasury. S&P said the wider gap could be caused by lower-than-expected government revenue, rising interest payments and increased spending ahead of the election.
The rating agency also cited additional costs linked to the ongoing conflict in the Middle East, which could increase the cost of fuel, fertiliser and other imports.
Despite the concerns, S&P maintained Kenya’s B credit rating and a stable outlook.
The agency said Kenya still has strong economic growth prospects and access to concessional financing from external lenders. These factors are helping to offset concerns over the country’s high debt-servicing costs and slow progress in reducing the fiscal deficit.
S&P also cut its forecast for Kenya’s economic growth in 2026 from 5.1 per cent to 4.9 per cent, mainly because of higher energy and import costs linked to the Middle East conflict.
The agency expects Kenya’s current account deficit to reach 3 per cent of GDP in 2026, warning that disruptions to international trade and transport could raise production costs and reduce household purchasing power.
However, Kenya’s foreign exchange reserves have improved significantly. S&P said reserves had reached $15.3 billion (about Ksh1.98 trillion) in August 2026, compared with $6.6 billion in December 2023.
The stronger reserves, together with higher tourism earnings, diaspora remittances and foreign investment inflows, give Kenya a stronger cushion against external economic shocks.
The warning comes as the government expects the economy to grow by 5.1 per cent in 2027 as global supply chains improve and external pressures ease.
Kenya is also planning to return to international financial markets to raise more funds while seeking to unlock up to Ksh151.2 billion in World Bank financing during the 2026/27 financial year.
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