S&P Global Ratings has warned that Kenya’s fiscal deficit could widen to 7.1 per cent of GDP in the 2026/27 financial year, driven by revenue shortfalls, rising interest payments and increased spending ahead of the 2027 General Election.

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The projected deficit is above Treasury’s target of 5.5 per cent, with S&P also pointing to additional expenditure linked to the Middle East conflict as a factor likely to widen the gap.

Despite the warning, the global rating agency retained Kenya’s sovereign credit rating at B and maintained a stable outlook.

S&P affirmed Kenya’s B long-term and short-term foreign and local currency ratings, while its transfer and convertibility assessment remained at B+.

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The agency said the stable outlook indicates Kenya’s strong economic growth prospects and continued access to concessional external financing, which offset concerns over high interest costs, slower fiscal consolidation and external imbalances.

The forecast echoes concerns raised by Moody’s in July, when the credit rating agency warned that increased government spending ahead of the 2027 General Election could push the deficit beyond the Treasury’s projections.

Moody’s had also projected a 7.1 per cent deficit for 2026/27 , citing weaker revenue collection, pre-election spending and greater reliance on costly domestic borrowing.

S&P further lowered its 2026 economic growth forecast for Kenya to 4.9 per cent from 5.1 per cent, citing the impact of higher energy, fertiliser and other import costs linked to the Middle East conflict.

The agency also revised its current account deficit forecast for 2026 to 3 per cent of GDP, warning that disruptions to trade and logistics could increase production costs and put pressure on household purchasing power.

Kenya's external position has nevertheless strengthened, with foreign exchange reserves reaching $15.3 billion (Ksh1.98 trillion) in August 2026, up from $6.6 billion (Ksh854.04 billion) in December 2023.

📰 Source: Kenyans.co.ke