Moody’s Investors Service has downgraded Egypt’s credit score due to what the rating firm has termed “increasingly constrained” policy options to rebalance the nation’s economy without exacerbating social risks.
Moody’s has lowered its assessment of Egypt’s sovereign debt by one notch to Caa1, following a review initiated back in May, as confirmed in a statement released on Thursday. This downgrade places Egypt in the same category as countries like Bolivia and Nigeria.
The downgrade by Moody’s is attributed to “the government of Egypt’s worsening debt affordability trend and the persistence of foreign currency shortages in the face of increasing external debt service payments over the next two years,” as stated by the rating firm.
Moody’s also noted that the Egyptian government’s track record of implementing fiscal reforms and its asset sale strategy provides support for a stable outlook. Furthermore, the rating firm anticipates ongoing financial assistance from the International Monetary Fund (IMF) if Egypt continues to meet the established conditions, as well as backing from the Gulf Cooperation Council.
This development comes on the heels of a warning from IMF Managing Director Kristalina Georgieva, who stated earlier that Egypt would “bleed” precious reserves unless it devalues its currency again. Georgieva commended the steps taken by Egypt, her institution’s second-largest borrower, to address its economic challenges. Egypt has devalued its currency three times since early 2022, resulting in nearly a 50% depreciation against the US dollar. Georgieva emphasized that delaying further devaluation would only worsen the situation, emphasizing that prompt action is crucial to avoid further economic deterioration.
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5th October, 2023
Delino Gayweh
Serrari Financial Analyst
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