Global rating agency Moody’s Ratings has upgraded Egypt’s credit outlook from negative to positive following the country’s successful acquisition of fresh foreign funds from the International Monetary Fund (IMF) and bilateral lenders.
The agency has confirmed Egypt’s long-term foreign and local currency issuer ratings at Caa1, shortly after finalizing a deal with the IMF to increase the initial loan package from $3 billion to $8 billion. This agreement aims to address the severe foreign currency shortages faced by Egypt.
Read more: IMF agrees to expand Egypt loan agreement by $5 billion
Caa1 rating
Moody’s has also affirmed Egypt’s foreign-currency senior unsecured ratings at Caa1, as well as its foreign-currency senior unsecured MTN program rating at (P)Caa1, according to a statement released by the agency.
Additionally, Moody’s has maintained the backed senior unsecured ratings of the Egyptian Financial Corporation for Sovereign Taskeek Sukuk company at Caa1.
The positive outlook is attributed to significant changes in Egypt’s economic policy, including substantial currency devaluation and interest rate increases.
IMF deal and economic measures
Furthermore, Egypt’s recent actions to secure foreign currency have contributed to the positive outlook. The country signed a deal with the IMF immediately after raising key policy rates and devaluing its currency, aiming to navigate a challenging economic environment.
Moreover, Egypt entered into a $35 billion agreement with the UAE’s Abu Dhabi Holding Company (ADQ) on February 24, in an effort to alleviate its foreign exchange crisis. On February 29, Egypt received $5 billion from the UAE as the first tranche of the fund development for the Ras El Hekma project.
Moody’s highlights that the significant front-loaded foreign direct investment from the UAE (Aa2 stable) substantially strengthens Egypt’s foreign exchange reserves, providing broad coverage for the estimated external financing gap until fiscal 2026. As a result, the downside risks that led to the negative outlook in January have been significantly reduced, the agency added.
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