disaster | Moody's begins downgrading Egypt's credit rating and the Egyptian economy before the presidential elections in Egypt


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Updates on Egyptian economic affairs presented in this episode of Samri Channel.
Starting with the American bank Morgan Stanley, which in its latest reports on the Egyptian economy adopted a pessimistic stance towards Cairo in light of the financial-strapped country facing what the American bank described as “increasing risks” in the coming months. In the report, the bank lowered its view of Egypt’s government debt instruments from a position of “neutral” to “unfavourable,” as part of a broader report in which it changed its preference for emerging market debt with high risks and generous returns over investment-grade securities, explaining that high returns Inflation-adjusted US bonds reduce the relative advantages of risky assets. Morgan Stanley strategists said that the impending presidential elections in December will weaken Egypt's ability to continue implementing reforms, including moving to a flexible exchange rate system, a key condition in the International Monetary Fund's $3 billion loan program.

On the other hand, Moody's credit ratings agency announced that it lowered Egypt's credit rating from B3 to Caa1, with a stable outlook. The agency attributed the decision to lower the rating to the deterioration of the country's ability to bear debt, with the continued shortage of foreign exchange in the face of the increase in external public debt service payments over the next two years, indicating that the process of covering debt service through current reserves amounting to about 27 billion dollars may weaken significantly. During the next two years, especially in the absence of measures to enhance foreign exchange reserves.

Finally, International Monetary Fund Executive Director Kristalina Georgieva said Thursday that Egypt will “deplete” its precious foreign exchange reserves unless it devalues the pound again. In an interview with Bloomberg, Georgieva praised the other steps taken by Egypt, the second largest borrower from the IMF after Argentina, to correct the course of its crisis economy. Egypt has devalued its currency three times since early 2022, and the pound has lost nearly half of its value against the dollar. Georgieva said, "Egypt is delaying the inevitable by refraining from doing so (devaluation of the currency) again, and the longer it waits, the worse it becomes."

Meanwhile, the Fund Director expected, in a televised interview with Al Arabiya, that the first review of the Egyptian economic reform program would take place before the end of this year.

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