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Moody’s lowers Egypt rating to B3 but changes outlook to stable

REUTERS/Mohamed Abd El Ghany
Moody's does not expect Egypt's liquidity and external positions to rebound quickly

Ratings agency Moody’s lowered Egypt’s sovereign rating by one notch to B3 from B2 on Tuesday, citing the country’s reduced external buffers and shock absorption capacity.

The agency changed its outlook for Egypt to stable from negative.

“Moody’s does not expect Egypt’s liquidity and external positions to rebound quickly”, the agency said.

Egypt has continued to face a foreign currency shortage despite allowing the Egyptian pound to depreciate sharply in recent months.

The country’s headline inflation is expected to accelerate further in January after surging to its highest in five years in December, according to a Reuters poll.

The agency also lowered Egypt’s local-currency ceilings to Ba3 from Ba2.  

Earlier this week, S&P Global said a contraction in Egyptian non-oil private sector activity entered its 26th straight month as high inflation and a continued shortage of foreign currency weighed on business.

The S&P Global Egypt Purchasing Managers’ Index slipped to 45.5 in January from 47.2 in December, well below the 50.0 threshold that marks growth in activity.