The African Union (AU), through the African Peer Review Mechanism (APRM), has expressed criticism towards Moody’s Global Credit Rating Agency for changing Kenya’s economic outlook from negative to positive.
The AU has called the move hasty and inaccurate, questioning the reasoning behind such a shift.
Moody’s made the announcement about the improved outlook, stating that reduced liquidity risks and better debt affordability were major factors in the revision.
However, the APRM raised concerns about the methods Moody’s used to make this assessment. The AU body argued that the change should have been a gradual one, first moving the outlook to stable before being marked as positive.
In a statement released on 27 January 2025, the APRM pointed out a possible error in Moody’s assessment. The AU body suggested that the change in outlook seemed like an attempt to correct a mistake made in July 2024 when Moody’s downgraded Kenya’s credit rating to negative.
This downgrade had been attributed to political unrest related to the proposed Finance Bill, which was still being discussed at that time.
The APRM described Moody’s actions as premature. It was noted that the downgrade last year was based on incomplete data, as key fiscal policies and budgetary details had not been finalized when the decision was made. The AU body believes that the revision to a positive outlook was rushed and did not follow a logical progression.
Kenyan President William Ruto, on the other hand, welcomed Moody’s positive assessment in a public address on 26 January 2025.
He credited the improved economic outlook to his government’s strict fiscal policies, which he argued had helped reduce inflation, stabilize interest rates, and improve currency exchange rates.
The AU also pointed to a similar situation in Nigeria. In January 2023, Moody’s downgraded Nigeria’s economic outlook due to expected fiscal challenges. The Nigerian government disagreed with the rating, leading Moody’s to reverse its decision by December 2023 after seeing positive economic developments.
The APRM criticized Moody’s for making speculative evaluations. The AU warned that such actions could cause unnecessary economic strain, including higher borrowing costs and negative sentiment from investors.
The body emphasized the need for Moody’s to conduct thorough reviews before making credit ratings public.
The APRM has called on global rating agencies to be more careful and to avoid issuing speculative ratings that could harm African economies.
The AU believes that careful and comprehensive reviews are essential for accurate assessments and that rushed judgments could negatively affect the financial stability of nations, especially in Africa.
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