Moody's revises Egypt's outlook to negative

Updated 1/19/2024 4:44:00 PM

Arab Finance: Global ratings giant Moody's has downgraded Egypt's outlook from stable to negative, citing growing concerns about the country's credit profile, as per a recent statement.

The revision shed light on the escalating risks of continued weakening in Egypt's credit standing, driven by challenging macroeconomic conditions and ongoing adjustments in exchange rates.

Moody's emphasizes that a substantial rise in interest payments, coupled with increasing external pressures, has complicated Egypt's macroeconomic adjustment process.

The agency underscores the possibility that policy actions and external support may fall short in averting a debt restructuring scenario.

While Moody's acknowledges Egypt's historical track record of implementing fiscal reforms, it remains to be seen whether this capacity will be sufficient to secure additional financial support from the International Monetary Fund (IMF).

The agency underscores the importance of Egypt's fiscal reform implementation in potentially unlocking further assistance to address the mounting economic challenges.

Moody's warned earlier that Egypt might have a tough time handling its debt and securing liquidity due to external challenges that have led to a decline in its local currency and higher interest rates.

In October, Moody’s Investors Services lowered Egypt’s long-term foreign- and local-currency issuer ratings to Caa1 from B3.

It is worth mentioning that Egyptian economic growth slowed down to 2.65% in the first quarter (Q1) of the current FY, compared to 4.4% in the same period a FY earlier.

Also, it achieved a total budget deficit of 4.95% of the gross domestic product (GDP) during the first half (H1) of the current fiscal year (FY) 2023/2024.