Skip to content Skip to Search
Skip navigation

Moody’s downgrades Egypt on rising borrowing costs

Egypt downgrade Reuters/Mohamed Abd El Ghany
A currency exchange bureau in Cairo. Egypt is suffering from ongoing foreign currency shortages

Moody’s Investor Service has downgraded Egypt’s credit rating to “Caa1” from “B3”, citing high inflation and rising domestic borrowing costs.

The downgrade also reflects the persistence of foreign currency shortages due to increasing external debt service payments over the next two years.

“An inability to arrest a further drawdown in foreign currency liquidity in the monetary system will likely lead to a downgrade while a further deterioration in debt affordability undermines confidence in the government’s capacity to service its debt,” the ratings agency said in a report.

However, Moody’s changed Egypt’s outlook to stable due to the government’s track record of fiscal reform implementation capacity and the launch of the asset sale strategy.

In addition, it expects continued external financial support from the International Monetary Fund (IMF) under its $3 billion deal and from the Gulf Cooperation Council countries.

Egypt’s local-currency ceiling was lowered to “B1” from “Ba3”, and the foreign-currency ceiling to “B3” from “B2”.

The report said that foreign exchange shortages persist despite the improvement in the current account deficit to 1.2 percent of GDP at the end of fiscal 2023 from 3.5 percent in fiscal 2022 on the back of strong import compression and improved revenues from Suez Canal and tourism.

Latest official figures showed that the Central Bank of Egypt’s reserves stood at $34.9 billion in August, representing just a $1.5 billion increase since last June and $7 billion less than before Russia’s invasion of Ukraine. 

Saudi Arabia, the UAE and Qatar deposited $13.9 billion into Egypt’s central bank last year.

Moody’s, however, believes that the materialisation of asset sale proceeds at the central bank will help restore the economy’s foreign currency liquidity buffer.

These proceeds include the $1.9 billion in sales finalised on July 11, of which $1.65 billion was in foreign currency. Another $3.5 billion will be raised from sales in fiscal 2024.

Last month global index provider FTSE Russell said it will add Egypt and Pakistan to the watch lists for potential demotion in its equity index suites.

The two countries will be on watch lists for demotion from “secondary emerging markets”, with Egypt moving to become an “unclassified market” and Pakistan getting “frontier market” status.

Egypt has already imposed import restrictions to curb forex outflow, while at least two national banks have suspended using Egyptian pound debit cards outside the country.

The country is gearing up for elections in December after devaluing its currency by more than half in the year to March.

Latest articles

Waste To Energy Biogas plant with solar, battery station and E-car charging station

African renewables are ripe for investment, says Irena

Africa accounted for less than 1 percent of the new renewable energy sources added globally last year, and a conference in Abu Dhabi this week called on wealthy investors to help the continent achieve its targets. Amani Abu Zeid, commissioner for infrastructure and energy of the African Union Commission, told the International Renewable Energy Agency […]

Saudi Arabia Ronnie O'Sullivan snooker

Ronnie O’Sullivan to be Saudi snooker ambassador

Saudi Arabia has signed a deal with the world’s top snooker player, Ronnie O’Sullivan, for him to act as an “ambassador” for the sport in Saudi Arabia.  It was announced alongside news that Saudi Arabia has become an official sponsor of the World Snooker Championship that begins this weekend in Sheffield, UK. Under the three-year […]

A man wades through a flooded street in Dubai. Some areas of the UAE received more than a year's worth of rain in one day Video length: 03:08

UAE president orders review after flooding

The UAE’s president, Sheikh Mohamed bin Zayed Al Nahyan, has ordered an urgent review of the country’s infrastructure after historic levels of rainfall brought the Gulf state to a standstill, with some areas seeing more than a year’s worth of rain in one day. The president has contacted authorities “to quickly work on studying the […]

Visitor numbers to Lebanon for the first 10 months of 2023 were up 21% on 2022 but there is currently 'no significant traffic' from the West

Beirut airport arrivals drop as Westerners stay away

The daily arrival rate at Lebanon’s only functioning international airport is down by 4 percent year on year in the first quarter of this year, according to Marwan Haber, the head of Middle East Airline’s (MEA) commercial division. Speaking at the Horeca hospitality conference in Beirut on Tuesday Haber said 95 percent of arrivals were […]