Moody’s downgrades Egypt, pushing bonds further into junk status
Moody's Investors Service downgraded Egypt's credit rating from B2 to B3 on February 7, pushing the North African country further into junk bond or non-investment grade territory.
The ratings agency said the Egyptian economy is increasingly vulnerable to fragile global conditions, as the government tries to shift to a more export-oriented growth model in which the private sector plays a far bigger role, backed by a flexible exchange rate regime.
The administration of President Abdel Fattah El-Sisi, who took power following a military coup in July 2013, agreed to a number of economic reforms under a $3 billion, 46-month support package with the International Monetary Fund (IMF) announced in December. Along with the flexible exchange rate, this involves reducing the role of the state in the economy.
Moody’s said such changes should help to attract capital inflows and reduce Egypt's vulnerabilities, but it warned that “these measures will ultimately take time” and added that “notwithstanding the clear commitment to a fully flexible exchange rate, the government's capacity to manage the implications for inflation and social stability is yet to be established”.