Moody’s issues negative outlook for Egypt’s credit profile amid economic challenges.
Escalating risks highlighted as Moody’s downgrades Egypt’s credit outlook.
Global rating giant Moody’s recent downgrade of Egypt’s credit outlook from stable to negative underscores growing concerns about the nation’s credit standing. The move reflects challenges in the macroeconomic landscape and ongoing exchange rate adjustments.
Economic challenges and exchange rate adjustments
In a recent statement, Moody’s, the global ratings giant, has downgraded Egypt’s credit outlook from stable to negative. The revision sheds light on the escalating risks arising from continued weakening in Egypt’s credit standing, primarily driven by challenging macroeconomic conditions and ongoing adjustments in exchange rates.
Moody’s highlights rising interest payments and external pressures
Moody’s emphasized the challenges Egypt faces, noting a substantial increase in interest payments and growing external pressures that complicate the nation’s macroeconomic adjustment process. This scenario raises concerns about the adequacy of policy actions and external support in preventing a potential debt restructuring.
Fiscal reform crucial for unlocking IMF support
Despite acknowledging Egypt’s historical track record of implementing fiscal reforms, Moody’s questions whether this capacity will 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.
The news comes as Egypt’s government ruled out an upcoming currency devaluation against the US dollar coinciding with the visit of a delegation from the IMF, describing possible scenarios as “mere speculations.”
Struggles to handle debt
Moody’s earlier warned that Egypt might struggle to handle its debt and secure 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.
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. The country 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.
For trade news, visit our dedicated archives.