Why Moody’s is less worried about Kenya’s debt, for now

International credit rating agency Moody’s has upgraded Kenya’s credit rating, saying the risk of the country failing to pay its debts in the near future has reduced.

In simple terms, Moody’s believes Kenya is now in a better position to meet its loan repayments than it was before. The upgrade is based on improved foreign-currency availability, better access to loans, and improved management of existing debt.

However, Moody’s has also warned that Kenya’s debt problems are not over, and tough decisions still lie ahead.

One of the main reasons for the upgrade is that Kenya now has more foreign currency, especially US dollars.

By the end of 2025, the country’s foreign exchange reserves stood at $12.2 billion, up from $9.2 billion a year earlier.

These reserves are like a savings account used to pay for imports such as fuel, medicine and machinery, and to repay foreign loans.

According to Moody’s, Kenya now has enough reserves to cover imports for more than five months, which is considered a safer position.

The improvement has been helped by more money coming into the country through remittances from Kenyans abroad, better exports, and stronger earnings from services such as tourism and transport.

Moody’s also noted that Kenya has reduced the gap between what it earns from the rest of the world and what it spends. The country’s current account deficit has fallen sharply over the past few years.

This means Kenya is borrowing less foreign money to run its economy, easing pressure on the shilling and reducing the risk of a dollar shortage.

With less pressure on foreign currency, the chances of missing external debt payments have reduced.

Another key reason for the upgrade is Kenya’s return to international bond markets. In 2025, the government raised $3 billion by selling Eurobonds after staying out of the market for several years.

Some of this money was used to repay older loans that were due soon, pushing the next big loan repayment to 2030.

This gave the government more time to plan and reduced the risk of being forced to repay large amounts at once.

Moody’s says this improved Kenya’s ability to manage its debts and reduced the chances of a sudden financial crisis.