Moody’s downgrades Egypt’s ratings to B3
Updated 2/8/2023 8:15:00 AM
Arab Finance: Moody's Investors Service has downgraded Egypt’s long-term foreign- and local-currency issuer ratings to B3 from B2, changing its outlook to stable from negative, the agency announced on February 7th.
Moreover, the agency has downgraded the country’s foreign-currency senior unsecured ratings to B3, and its foreign-currency senior unsecured MTN program rating to (P)B3.
“The downgrade to B3 reflects Egypt's reduced external buffers and shock absorption capacity while the economy undergoes a structural change toward a more export- and private sector-led growth model under a flexible exchange rate regime,” the New York-based agency said.
The American agency has also lowered Egypt's local-currency ceilings (LC) to Ba3 from Ba2, maintaining the three-notch difference with the sovereign rating that reflects the public sector's large footprint in the economy.
Additionally, the FC ceiling was also lowered to B2 from Ba3, two notches below the LC ceiling from one notch previously, to reflect the narrow foreign currency liquidity buffer in the monetary system, Moody’s added.
“The reported adoption of import restrictions and foreign currency withdrawal limits abroad point to potential risks of transfer and convertibility restrictions under scenarios of intensifying stress, mitigated by the agreed shift to a flexible exchange rate regime and the recent removal of letters of credit requirements that supports a gradual rebalancing of external accounts,” the agency highlighted.
The North African country’s liquid foreign exchange (FX) reserves have dropped since the negative outlook assignment in May 2022 and FX liquidity cushions in the monetary system have declined, raising external vulnerability amid weak global conditions, according to Moody’s.
Related News
