Macro Analysis /

Kenya election preview - markets not liking the uncertainty

  • Odinga and Ruto pledge support for marginalized communities

  • The latest Ipsos survey shows Odinga winning 47% of the vote and Ruto 41%.

  • Volatility in Kenyan assets is expected to spike in the coming days

Takudzwa Ndawona
Takudzwa Ndawona

Financial Markets Analyst

Kieran Siney
Kieran Siney

Head of African Markets

ETM Analytics
4 August 2022
Published byETM Analytics

Kenya’s Presidential election takes centre stage in East Africa

Kenyans will head to the polls to vote for their new President on Tuesday, 9 August 2022. Historically, elections in Kenya have been characterized by violence amid allegations of unfair voting. Candidates and their allies have also used tribal politics to turn people against one another. While the election could be smoother than has been the case in previous years, allegations of election fraud are still likely, and the risk of damaging post-election disputes and violence could once again cast a shadow over Kenya. The presidential race is set to boil down to Deputy President William Ruto and Raila Odinga. The former is running on a United Democratic Alliance (UDA) party ticket, while the latter is the Orange Democratic Movement party leader. President Uhuru Kenyatta, who will leave the office at the end of the constitutional two terms, has endorsed his former archrival for the country's top job after their parties joined forces. This brings together two of Kenya's top political dynasties, who have a long history of opposing each other at the ballot box.

Odinga and Ruto have pledged support for the marginalized communities if they become president, using policies that will increase government spending to drive economic growth. Odinga has proposed a rural development policy and a monthly stipend of KES 6,000 ($53) for about 2 million of the poorest families, while Ruto has suggested a fund of at least KES 100bn to support small businesses. Odinga has also presented a plan largely centred on social protection measures, including money transfers and universal healthcare. He also aims to fight corruption and manage public debt. Managing debt is where the two main rivals differ. Deputy President William Ruto has pledged to stay away from debt restructuring if he wins next week's election. According to Ruto, the government will not go "any near debt restructuring," and while he plans to "put the brakes on borrowing, Ruto's government will not stop but "slow it down." Ruto's comments are the opposite of what his main rival intends to do with Raila Odinga, vowing to restructure debt to reduce debt-servicing costs and free up resources for development.

What are the opinion polls saying?

The latest Ipsos survey shows Odinga winning 47% of the vote and Ruto 41%. Meanwhile, Roots Party flag bearer George Wajackoya got 2.9% of the vote and Agano Party’s Wahiga Mwaura just 0.2%. The poll involving 6,105 registered voters was done ahead of the presidential debate between July 23 to 26 and after the debate from July 27 to 30 in all 47 counties. The survey also showed that Odinga could possibly bridge the 3% +1 difference to the threshold to win the first round, given there are still 9% undeclared voters (5.1% who refused to disclose and 3.8% who are undecided).                                                      

Financial Market Analysis

Given that we are not political analysts, we are going to refrain from making a call on who we think will win the election. We can, however, provide insight into the possible financial implications should either candidate win. Regardless of the outcome, volatility in Kenyan assets is expected to spike in the coming days. We have already seen some significant price movements in Kenyan stocks and bonds and the shilling over the past month. Official data showed that net foreign outflows from stocks increased to KES 10.9bn or around $92mn in the three months through to June. While this is partly a function of deteriorating global market conditions as central banks around the world hike interest rates, uncertainty surrounding the election would have also contributed. While Kenya’s bourse, the Nairobi All Share Index, has staged an impressive rebound since its lows at the end of June, climbing more than 18%, the index is still down 16.5% YTD. Kenyan bonds have also staged a considerable recovery in recent days. However, the broader bias this year remains decisively bearish, with the market demanding a significant premium for holding Kenyan bonds due to concerns over the country’s fiscal trajectory and political uncertainty related to the election. The Kenyan shilling, meanwhile, has depreciated by 5.3% against the USD and is trading at its weakest level on record. The forwards market is pricing for further weakness when looking at the 12-month tenor. The 12 month KES NDF is currently trading around 150 per dollar, while the USD-KES spot sits just below 120, with the recent spike driven by election-related uncertainty.    


Election-related uncertainty is inevitable given how difficult the election is to call and will heighten in the next few days as August 9 draws closer, leading to slow business activity and wavering business confidence, including possible delays to projects and investment. If disputes and social unrest do not mar the election, the effect on the economy will likely be temporary. However, disruption similar to that surrounding the previous election in 2012 would be much more damaging. Ultimately, whoever wins the race to succeed, President Kenyatta will have to contend with a growing debt burden exacerbated by the coronavirus pandemic and may have to deal with the aftermath of a potentially divisive election. While President Kenyatta's infrastructure spending has bolstered the country's economy, it has come at a high cost to its fiscus. Key fiscal metrics such as debt to GDP and debt servicing costs to GDP have risen sharply under the Kenyatta administration, to the point where credit rating agencies and international lenders, including the  International Monetary Fund, have warned that Kenya faces a high risk of debt distress.