The African Peer Review Mechanism (APRM) has expressed serious concerns over Moody’s recent credit rating actions on Kenya, describing the January 24 downgrade as inconsistent and flawed. Moody’s changed Kenya’s outlook from “negative” to “positive” while maintaining its Caa1 rating, citing improved debt affordability and enhanced liquidity conditions. However, the APRM argues that such a move is rare and signals a misaligned assessment of Kenya’s credit trajectory.
“This rating action was a reversal of Moody’s premature rating action on 8 July 2022 when it incorrectly gave priority to Kenya’s vote on the proposed Finance Bill,” the APRM stated. It added that the 2022 rating was “speculative,” as it underestimated the bill’s appropriability and overlooked broader fiscal and economic dynamics.
The APRM, mandated by the African Union to review international credit ratings, believes that Moody’s analysis failed to reflect Kenya’s actual fiscal improvements. The agency argues that such misjudgments by global rating firms not only misrepresent economic realities but can also harm investor sentiment and sovereign debt management.
The APRM also highlighted a similar issue with Moody’s downgrade of Nigeria from B3 to Caa1 in January 2023, which it said was based on speculative assessments. “These erroneous actions by Moody’s demonstrate the inadequacy of their rating models when evaluating emerging markets,” the APRM said.
Calling Moody’s actions “irresponsible and detrimental,” the APRM urged the ratings agency to improve its methodologies and adopt a self-auditing process. “It is critical for rating agencies to ensure their analyses are data-driven and holistic,” the statement emphasized.
