Egypt notches a Moody’s upgrade, and the door is open to another one if debt and interest costs keep falling

Against regional headwinds, Egypt secures rating upgrade from Moody’s: Credit rating agency Moody’s raised Egypt’s local and foreign currency ratings to B3 from Caa1 on Friday, and kept the outlook positive. Moody’s cited years of fiscal consolidation and structural reforms for the upgrade, and said the move to a flexible exchange rate and tighter monetary policy helped the economy absorb higher oil prices and a rough regional backdrop.

Moody’s says it would consider a further upgrade if debt and interest costs fall faster than its baseline and growth and revenue collection pick up. Local borrowing costs coming down more quickly as inflation eases would also help, it adds.

IN CONTEXT- Egypt’s debt fell to 81.8% of GDP at the end of June from 95.2% in June 2023, and Moody’s sees it slipping below 70% by the end of the decade. The interest bill is the catch, though: it still eats up about 59% of government revenues. That’s down from 63% a year earlier, but it’s heavier than at most similarly rated countries, and Moody’s expects it to ease to around 50% over the same period.

Add Russia to the list

Egypt may soon get a Russia-backed battery-storage production line: Egypt-based tech outfit Telecom and Technology Co. (Teletech) and Russia’s Rosatom have agreed to localize battery-storage assembly in Egypt, with planned facilities carrying potential production capacity of up to 500 MWh a year, according to a Rosatom statement. The locally assembled lithium-ion storage systems will target several corners of the economy, including electricity, telecoms, data centers, oil and gas, and other industrial applications, but no details on the ticket size, ownership split, or timeline were disclosed.

Egypt’s battery-localization pipeline is getting busier. Battery manufacturing company BME signed a contract with China’s CATL last month for an EGP 2 bn-plus battery-systems plant that will start at 1 GWh of annual capacity before scaling to 5 GWh, while Amea Power signed EPC contracts in June for 1.5 GWh of standalone storage projects alongside a planned factory capable of producing up to 3 GWh of battery-storage systems annually.