Moody's Keeps Egypt’s Credit Rating at B2Source: www.export-egypt.com 9/1/2019, Location: Africa |
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Moody’s financial services company has announced in its annual report, which was released on 29 August, that it is continuing to rate Egypt's credit profile at B2.
In April this year, Moodys' upgraded Egypt's credit rating from B3 to B2, saying that ongoing fiscal and economic reforms will support a gradual but steady improvement in Egypt's fiscal metrics and raise real GDP growth. The report said that the decision to keep Egypt's credit profile at B2 reflects concerns over weaknesses in Egypt’s credit profile. "Despite gradually improving, government finances and its large government financing needs amid high rollover rates expose the sovereign fund to a potential tightening in domestic or external financing conditions." However, Moody's expected domestic borrowing costs to gradually decline as the effects of energy price and tariff hikes vanish, allowing the central bank to lower interest rates. "Egypt's debt affordability as measured by interest to revenue will remain very weak and financing needs very large in the next few years," said Moody's vice president, senior analyst and the report's co-author Elisa Parisi-Capone. "Over the longer term, the removal of structural obstacles to a more inclusive, private sector-led growth model will be a gradual process that remains exposed to long-standing vested interests or the risk of reform reversal." The report also shed light upon the labour conditions in Egypt, saying that "despite improving labour market conditions, securing jobs for the expanding working age population remains a long-term challenge. In addition, domestic political stability has improved, but security risks linger in certain areas, fuelling event risk." "The country's credit strengths include a strong track record of reform implementation and continued reform commitment, its large and diversified economy, a large domestic funding base and replenished foreign exchange reserves. Following annual growth of 5.6 percent in FY 2019, Moody's expects further convergence to 6 percent by 2021." “Wide fiscal deficits and high government debt levels are expected to decline gradually as primary surpluses are maintained. Comparatively low levels of foreign currency-denominated and external government debt also support the credit profile,” Moody’s estimated. |
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