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Egypt outlook revised to positive after lending deals

A ship in the Gulf of Suez before it enters the Suez Canal. The Canal accounts for a large proportion of Egypt's foreign currency revenue Reuters
A ship in the Gulf of Suez before it enters the Suez Canal. The UAE’s 'very large' FDI contribution significantly bolsters the Egyptian economy’s FX reserves

Moody’s has upgraded Egypt’s outlook from negative to positive following the expanded $8 billion funding from the International Monetary Fund (IMF).

The credit-rating company also affirmed Egypt’s foreign currency ratings.

The revision reflects the significant official and bilateral support announced and marked policy steps taken in the past week that will, if maintained, support macroeconomic rebalancing, Moody’s said in a statement.



The UAE’s “very large” front-loaded foreign direct investment contribution significantly bolsters the Egyptian economy’s foreign exchange reserves.

The Gulf state’s $35 billion, or 8.8 percent of Egypt’s GDP, foreign investment commitment includes $24 billion in new cash transfers over two months to acquire land development rights.

The injection of fresh forex liquidity will be sufficient to help close the external financing gap, estimated at $15 billion, until fiscal 2026, in addition to a $7 billion forex backlog that has accumulated since February 2022, Moody’s said.

The conversion of $11 billion in UAE deposits at the central bank to foreign investments will reduce the monetary system’s net foreign liability position by the same amount over the next few weeks.

The positive outlook captures the marked change in economic policy, including a “large” devaluation of the currency and an increase in interest rates. 

Moody said that if these measures are sustained, Egypt has a better chance of maintaining an upsized IMF programme, reducing the risk of renewed external imbalances, and enhancing the economy’s shock resilience over time.

Capital Economics, the London-based economic analysis company, said in a research note that the IMF announcement, on the back of the rate hike and devaluation on Wednesday, represents a shift towards more orthodox policymaking and should provide international investors with further confidence that Egypt will avoid a sovereign default.

“Admittedly, there have been numerous false dawns for Egypt in the past, and the key will be for officials to stay the course with the orthodox policy shift,” said James Swanston, the consultancy’s Mena economist.

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