Moody’s to upgrade Egypt’s rating to B2: Pharos

CAIRO – 16 August 2017: Egypt’s credit rating is predicted to be upgraded from B3 to B2 by Moody’s Investors Service in its upcoming review, scheduled on August 18, Pharos Holding said.

In a Wednesday research note, Pharos said that the potential upgrade will match international credit rating Fitch’s current rating of B.

Pharos’s economist Ramy Oraby expected the economic growth rate to pick up “gradually” over the next 2 years, to reach pre-2011 levels.

As for fiscal year 2016/17, the Ministry of Finance forecasted the economic growth rate to record 4.1 percent, higher than Pharos’ project of 3.8 percent. Meanwhile, the International Monetary Fund (IMF) anticipated a GDP growth rate of 3.5 percent.

“We believe that a credit rating upgrade will support further foreign inflows into the equity and the fixed income market, and that it will boost domestic confidence in the Egyptian economic reform plan,” Oraby said.

The latest reform measures confirm the government’s commitment towards narrowing the budget deficit to a more sustainable level in the future, according to Oraby.

But the high inflation rate environment will pose a continued downside pressure to the economic outlook, Oraby added.

In the latest research note about Egypt in June, Moody’s said that although Egypt has taken economic reform measures including floating its currency, the country has not yet addressed the issue of the availability of foreign currency, which if solved would help banks in decreasing their net foreign liability position, Moody’s said in June.

The IMF’s Egypt program has improved the country’s fiscal and external position, although slowly, Moody's said in its Egypt report in April.

Moody’s predicted Egypt’s budget deficit will dip to 11.0 percent of the country’s GDP in fiscal year 2017 and 8.5 percent in 2019, compared to a 12.6 percent deficit in the fiscal year 2016, the report added.