Moody's keeps Egypt's rating at B2 with stable outlook

CAIRO – 12 May 2020: Moody's Investors Service ("Moody's") affirmed Monday the long-term foreign and local currency issuer ratings of the Government of Egypt at B2, and kept the outlook stable.

Moody's also affirmed Egypt's foreign currency senior unsecured ratings at B2, and its foreign currency senior unsecured MTN program rating at (P)B2.

“The affirmation of the B2 rating and stable outlook reflect Egypt's ongoing credit strengths and challenges that Moody's does not expect to change materially relative to similarly-rated sovereigns through the global shock posed by the coronavirus pandemic. While the coronavirus shock exposes Egypt's credit vulnerabilities, improvements in governance and policy effectiveness in recent years shore up the sovereign's credit profile resilience to the current shock,” it clarified.

It explained that the rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. “The combined credit effects of these developments are unprecedented. For Egypt, the shock propagates through pressure on external financing requirements, diminished tourism receipts and remittances and slower growth.”

According to corporation, Egypt's government's large funding requirements and weak debt affordability driven by a high interest bill expose it to a sharp tightening in financing conditions triggered by the coronavirus.

“However, at this stage, Moody's assesses that a track record of economic and fiscal reform implementation and demonstrated capacity to manage significant shocks reduce the likelihood of global financial market disruption severely affecting Egypt. In particular, a broad domestic funding base and robust foreign exchange reserves in excess of maturing liabilities provide buffers against significant capital outflows from emerging markets in the wake of the coronavirus pandemic,” it stated.

Overall, Moody's expects the economic and financial shock to delay, but not derail the gradual decline in the government's debt burden, while its liquidity and external positions will likely remain broadly unchanged.

Egypt's country ceilings remain unchanged with the foreign-currency bond ceiling at B1, the foreign-currency deposit ceiling at B3, and the local-currency bond and deposit ceilings at Ba1. The short-term country ceilings for foreign-currency bonds and deposits remain unchanged at Not Prime (NP).