Moody’s lowers credit rating prospects of the Egyptian economy to negative

Moody’s Investors Services announced that it lowered its outlook on Egyptian government issuances from stable to negative.

This reduction comes as a result of Egypt’s declining ability to bear government debt and increasing external pressures, with the long-term rating of issuances in foreign and local currencies set.

Moody’s highlights in its statement that there are increasing risks related to the strength of Egyptian credit, as a result of the difficulties in rebalancing the macroeconomy and exchange rate pressures.

Moody’s agency points to the increasing challenges facing Egypt, pointing to rising interest payments and the growing gap between official exchange rates and the parallel market, which complicates the macroeconomic adjustment process.

Moody’s data shows that Egypt faces special challenges, as its issuances of government debt instruments in local currency rose by 59% in the first half of the 2023-2024 fiscal year, recording up to 2.7 trillion Egyptian pounds.

Despite government efforts to control financial conditions and support the formal sector, escalating debts and worsening external pressures are casting their shadows on the Egyptian economy.

Moody’s expects an increase in IMF financing and the government’s pledge to achieve primary surpluses, but believes that the negative outlook reflects the potential risks of insufficient policy measures and lack of external support to avoid debt restructuring.

Although the base assessment scenario does not anticipate any restructuring soon, economic and financial pressures remain.

Moody’s agency also addressed the increase in interest payments and its impact on revenues, as they are expected to consume two-thirds of revenues at the end of fiscal year 2024.

It pointed to growing external pressures and a widening gap between official and parallel market exchange rates, which further complicates economic adjustment.

Experts believe that Moody’s rating reflects the structural challenges facing the Egyptian economy, which requires taking effective measures to improve the economic and financial situation.