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Fitch: Urgent political dialogue needed to restore stability in Kenya

January 08, 2008 | Cbonds

Fitch Ratings said today that urgent political dialogue is needed between the two sides in Kenya's disputed elections of 27 December if political stability is to be quickly re-established. Domestic, regional and international pressure for this to happen is intensifying, but progress so far remains limited and violence has continued.
"The negative implications of the political violence will be greater the longer the impasse continues," says Richard Fox, Head of Africa and Middle East Sovereign ratings at Fitch. Fitch will monitor political developments closely in coming days for signs that political tensions are easing and a negotiated solution is emerging or, by contrast, violence is continuing to escalate. In the former situation, Fitch believes economic fallout will be manageable. However, if political violence continues unabated, negative rating action will be warranted.

The presidential election result was expected to be close and this increased the risk of post-election violence, which has often been an unfortunate feature of Kenyan elections. However, tensions have been inflamed by evidence of electoral malpractice witnessed by international observers and allegations of vote-rigging by both the incumbent and opposition parties. Post election violence has taken on an ethnic dimension and risks long-term damage to political stability and governability unless quickly and effectively addressed. Even without the disputed outcome, negotiation and compromise would have been necessary given that neither President Kibaki nor opposition leader Odinga commands a majority in parliament. Dialogue is now even more urgent.

The economic impact of the violence has been predictable, with the currency under pressure and tax revenue lost due to business shutdowns. Tourism revenue is also likely to suffer. The planned Safaricom IPO and debut Eurobond issue will, at the very least, be delayed. Both transactions were major financing items in the 2007-08 budget, without which capital investment plans will have to be scaled back, or greater resort made to domestic financing, which would pressure domestic interest rates. Wider business confidence will also suffer, further contributing to slower growth. These negative economic implications also increase the pressure on key political actors to enter into dialogue.

Fitch assigned the Republic of Kenya a Long-term foreign currency Issuer Default Rating (IDR) of 'B+' with Stable Outlook and Long-term local currency IDR of 'BB-' (BB minus) with Stable Outlook in December 2007.

Società: Kenya

Nome completo della societàRepublic of Kenya
Paese di registrazioneKenya


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