Moody’s raises Egypt credit rating to ‘positive’

Moody’s Investors Service has upgraded Egypt’s credit outlook rating from “stable” to “positive”, praising the government’s IMF-spurred economic reform.

According to Moody’s recent statement, “ambitious” economic reform – alongside political stability – has led to structural improvements in Egypt’s fiscal and current account balances, with primary deficits dropping and debt beginning to shrink.

Moody’s added that the early signs of reform provide an image of a sustainable and inclusive growth path, which is able to maintain competitiveness and rapidly grow the labor force.

“The positive outlook signals that a downgrade is currently very unlikely,’’ Moody’s wrote.

The statement also cited Egypt’s growing foreign exchange rate, and the “likelihood” that public policy will be maintained given political stability.

The agency nonetheless kept Egypt’s long-term rating at B3, almost six spots below the investment grade. It also rated Egypt’s senior unsecured MTN program at (P)B3.

“The decision to affirm the B3 rating balances Egypt’s longstanding strengths — flowing in particular from its large and diverse economy — against the low-probability risk of sudden political upheaval that could have implications for the direction of policy, and very pronounced fiscal weakness, reflected in a high debt burden, low debt affordability and very large annual financing needs,” the statement reads.

“In turn, such fiscal weakness creates high refinancing exposure in an increasingly turbulent global financial environment, notwithstanding a deep and stable domestic funding base in its large banking sector”.

The report also sheds light on the stability of the deposit ceilings, domestic currency and foreign reserves. The foreign-currency bond ceiling remains at B2, while the foreign currency deposit ceiling is at Caa1.

Meanwhile, the domestic currency bond and deposit ceiling marks at Ba2, and the short-term country ceilings for foreign-currency bonds and deposits remain unchanged at NP (Not Prime).

Earlier in August, Fitch Ratings (a globally-recognized credit rating agency) reaffirmed Egypt’s long-term Issuer Default Rating (IDR) at “B”, while maintaining its outlook as “positive”.

In May, Standard & Poor’s (S&P) global rankings lifted Egypt’s sovereign credit rating from B- to B.

Both agencies join Moody’s in citing economic reform and political stability as the reason behind Egypt’s improved investment climate.

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