Moody's downgraded Kenya's sovereign rating further into junk territory on Monday, citing reduced capacity to implement a fiscal consolidation strategy to manage its debt. The agency lowered the country's local and foreign-currency long-term issuer ratings and foreign-currency senior unsecured debt ratings to Caa1 from B3. In June, President William Ruto retracted planned tax hikes after protests that resulted in at least 24 deaths. The withdrawn finance bill aimed to raise $2.7 billion in taxes to reduce the budget deficit and state borrowing. To offset this, Ruto's administration proposed spending cuts. Moody's noted that while spending cuts may narrow the fiscal deficit, progress will be slower than expected, prolonging weak debt affordability. "In the context of heightened social tensions, we do not expect the government to be able to introduce significant revenue-raising measures in the foreseeable future," the agency said. Moody's maintained its 'negative' outlook for Kenya, warning that larger fiscal deficits will increase borrowing needs and government liquidity risks. Attribution: Reuters
