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Moody’s kept Egypt’s outlook positive and affirmed its Caa1 rating — seven rungs into junk territory — the credit rating agency wrote. The agency believes the positive outlook “reflects the prospects for an improvement in Egypt’s debt service burden and external profile.”
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REMEMBER- Last March, shortly after the float of the EGP, Moody’s upgraded Egypt’s outlook to positive from negative and affirmed its Caa1 rating. The agency cited the USD 35 bn Ras El Hekma investment and policy measures taken by the central bank for its decision.
Optimism about what’s to come: Moody’s believes efforts taken to tighten liquidity and tame inflation “raise the prospects of durably lower inflation and interest rates, as the central bank’s monetary policy credibility and effectiveness strengthen.”
Fiscal measures to bear fruit: The agency sees subsidy reforms and tax reforms helping the government reach a primarily surplus of 3.5% of GDP this fiscal year.
But don’t get too excited: Credit vulnerabilities remain a risk and “plausible developments” could put efforts to improve debt affordability off track, seeing as “material improvements in debt affordability, the debt burden, and external stability depend on further steady enhancements in monetary and fiscal policy effectiveness, which are still nascent.”
What could derail efforts? Moody’s points to challenges arising in case of heightened demand for FX, in case regional developments result in outflows or lower confidence in the EGP. There is also the possibility of fiscal policy challenges as the Madbouly government works to increase social spending as needed.
Looking into Moody’s crystal ball: The agency sees the debt-to-GDP ratio to fall below 80% in the fiscal year 2026-27 from a forecasted 84% for the current fiscal year. It also sees interest-to-revenue to dip under 50% in FY 26-27 from 63% this fiscal year and external debt service to peak this fiscal year at USD 33 bn.
