Saturday 22 Feb
Moody's Ratings Agency has affirmed Egypt's long-term foreign and local currency ratings at Caa1, maintaining its positive outlook. This also includes the affirmation of Egypt's unsecured foreign currency rating at Caa1 and the unsecured foreign currency MTN program rating at (P)Caa1.
The positive outlook, in place since March 2024, reflects the potential for improvement in Egypt's debt service burden and external profile. Moody's acknowledges the progress made in external and fiscal rebalancing, noting the stronger foreign exchange reserves and declining borrowing costs following the currency devaluation and float.
The credibility and effectiveness of monetary policy are
improving as the central bank maintains its focus on inflation targeting and a
flexible exchange rate. This is expected to allow for interest rate reductions,
leading to lower debt costs while supporting stable foreign exchange inflows.
The government's efforts toward fiscal consolidation and
increased tax revenues, targeting primary surpluses of 3.5% of GDP, are also
noted.
However, the Caa1 rating still reflects credit weaknesses that pose a risk to sustained improvements in Egypt's financial and external positions. These weaknesses include the high, though declining, debt ratio, very weak debt affordability compared to peers, and persistently large domestic and external financing needs.
