Egypt Unhappy About Moody's Negative Outlook On Economy

Egypt unhappy about Moody’s negative outlook on economy

Egypt has expressed dissatisfaction with a recent negative outlook on the sovereign credit rating of the country’s economy by the American rating agency, Moody’s Investors Service (Moody’s).

The analysis by Moody's, which maintained Egypt's sovereign credit rating at Caa1 from a status of stable, cited increasing risks to the country's credit profile amid challenging macroeconomic and exchange rate adjustments, Fintech Gate reports. A rating of Caa1 signifies poor standing and high credit risk.

In response to Moody's analysis of Egypt’s economy, the country's Minister of Finance, Mohamed Maait, emphasised that the global rating agency failed to consider the government's ongoing efforts to stabilize the economy.

Maait described the current approach to handling Egypt’s economy as one that is flexible and balanced in managing macroeconomic risks, absorbing external shocks, and addressing negative impacts stemming from geopolitical tensions. He highlighted the government's commitment to meeting citizens' basic needs, expanding social protection networks, and maintaining financial discipline.

He further highlighted the success of the government's strategy, leading to an initial surplus of EGP 150 billion (approximately $4.8 billion) in the first half of the current fiscal year (July to December 2023), compared to EGP 25 billion in the same period last fiscal year.

The Finance Minister drew attention to Egypt's ability to meet financing needs over the next two years through its Initial Public Offering (IPO) program, attracting investments and reducing reliance on external financing. He noted the government's withdrawal of $3.5 billion from economic activities under the IPO scheme and access to approximately $5 billion in concessional financing from multilateral development banks.

“This reflects the confidence of these international institutions in the economic path pursued by the Egyptian government through financial policies more capable of achieving financial discipline and maintaining a sustainable primary surplus, along with continuing to implement structural reforms that enhance economic growth by making more room for the private sector,” Maait is quoted by Ahram Online.

Despite expectations of increased financial support from the IMF and the government running a fiscal surplus when debt payments are excluded, Egypt still faces significant challenges. Analysts have pointed to very weak debt metrics and heightened exposure to foreign exchange and interest rate risks. The country is grappling with its most severe economic crisis in decades, triggered by the ongoing conflict between Israel and Hamas.