Moody’s Investors Service has kept Egypt’s credit profile at “B2 stable,” reflecting concerns over the government’s weak, but gradually improving, finances and fiscal metrics, which shall boost annual growth to 6% by 2021, Invest-Gate reports.
The rating agency emphasized that the government’s financing needs are colossal with high rollover rates, which may force a tightening of the state’s domestic or external financing conditions, according to its annual credit analysis report in late August.
Yet, Moody’s presumes that domestic borrowing costs will gradually decline as the imprints of energy price hikes alleviate and primary surpluses are maintained, underlining that this will allow the Central Bank of Egypt (CBE) to lower interest rates.
The agency explained, “Comparatively low levels of foreign currency-denominated and external government debt also support the credit profile.”
“Egypt’s debt affordability as measured by interest to revenue will remain very weak and financing needs very large in the next few years,” Elisa Parisi-Capone, Moody’s vice president, senior analyst, and the report’s co-author, was quoted as saying.
“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,” Parisi-Capone further stated.
The North African country has been undergoing a series of economic reforms since late 2016, when it decided to free float its local currency. This was a requirement of the International Monetary Fund’s (IMF) USD 12 bn loan facility, with various conditions attached.
In an official statement in late July, after the government received the final installment, David Lipton, IMF acting managing director, reported, “Egypt has successfully completed the three-year arrangement under the Extended Fund Facility and achieved its main objectives. The macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform program and decisive upfront policy actions.”
