Egypt commits to strengthening credit rating after Moody's positive outlook revision

CAIRO – 8 March 2024: Minister of Finance, Mohamed Maait, has reaffirmed Egypt's determination to enhance its credit rating in the near future, according to a statement from the Cabinet on Friday.

The announcement follows Moody's positive revision of Egypt's outlook from negative to positive.

Maait believes that this shift in outlook reflects the confidence in Egypt's macroeconomic management during a challenging period and the effectiveness of the policies implemented to withstand various shocks over the past years.

He also highlighted Egypt's plan to reduce the debt-to-GDP ratio to below 80% within the next three years, with a reduction in debt service costs anticipated as the inflationary wave recedes and current high interest rates decrease.

Moody's recently revised its outlook on Egypt, affirming the Caa1 long-term foreign and local currency issuer ratings, citing significant official and bilateral support, as well as notable policy measures implemented in the past week.

The report emphasized the substantial $35 billion foreign direct investment contribution from the United Arab Emirates, which is expected to bolster Egypt's foreign exchange reserves and cover the estimated external financing gap until fiscal year 2026.

The positive outlook is attributed to key economic policy shifts, including currency devaluation and interest rate increases. If sustained, this is anticipated to support macroeconomic rebalancing, enhance the resilience of Egypt's economy to shocks, and assist in sustaining an expanded International Monetary Fund (IMF) program.

The report comes after Egypt's government and the IMF reached a staff-level agreement on necessary policies and reforms to complete the first and second reviews under the Extended Fund Facility (EFF) arrangement.

The IMF loan has been increased to $8 billion from the initial $3 billion, acknowledging the complex macroeconomic challenges faced by Egypt, including the impact of the recent conflict in Gaza on tourism and Suez Canal receipts.

While the report acknowledges Egypt's high debt ratio and weak debt affordability compared to peers, it anticipates gradual improvement over time, reducing fiscal accounts' vulnerability to shocks.