Moody's Investors Service has changed Egypt's outlook to negative from stable, reflecting the rising downside risks to the sovereign's ability to meet upcoming external debt service payments amid tightening global financing conditions.
While the economy's external position remains supported by significant financial commitments pledged by Gulf Cooperation Council (GCC) oil-exporting sovereigns and the prospect of a new IMF program, "tightening global financing conditions increase the risk of weaker recurrent inflows" than it anticipates, the ratings agency said in a note on Thursday.
In addition, the country, which is a major food importer trying to deal with spiraling wheat prices due to the Ukraine-Russia conflict, faces political risk. Moody's said, adding, if not mitigated, this could raise social tensions.
Also, while rising domestic borrowing costs, if sustained, will exacerbate liquidity risks and debt affordability challenges, both long-standing weaknesses of Egypt's credit profile, it said.
Moody's however affirmed Egypt's long-term foreign- and local-currency issuer ratings at B2 and. It also affirmed Egypt's foreign-currency senior unsecured ratings at B2, and its foreign-currency senior unsecured MTN program rating at (P)B2.
"The B2 rating remains supported by the government's pro-active crisis response and track record of economic and fiscal reform implementation over the past six years. Egypt's broad and dedicated domestic funding base helps weather tightening financing conditions. Egypt's strong trend GDP growth supports economic resiliency and the prospect of attracting foreign direct investments in line with the government's privatization strategy."
(Writing by Brinda Darasha; editing by Seban Scaria)