Moody’s International Credit Ratings Agency
Moody’s credit ratings agency announced that it lowered Egypt’s credit rating from B3 to Caa1, attributing this to the deterioration of the country’s ability to sustain debt.
Egypt is facing an economic crisis amid record inflation and a severe shortage of foreign currency, and high borrowing over the past eight years has made repaying foreign debt an increasingly burdensome burden.
Moody’s expected that proceeds from the sale of assets would help restore the economy’s hard currency liquidity reserve, and set Egypt’s outlook at “stable.”
The agency’s expectations reflect that Egypt will continue to receive financial support from the International Monetary Fund under an agreement worth three billion dollars.
The Executive Director of the International Monetary Fund, Kristalina Georgieva, warned on Thursday that the Egyptian government would “deplete” its precious foreign exchange reserves unless it devalued the pound again.
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.”
What does Caa1 rating mean?
Moody’s Caa1 rating is speculative, and liabilities and debt rated Caa1 are judged to be of poor quality and subject to very high credit risk.
It is noteworthy that Moody’s divides long-term credit ratings into grades that mainly include grades with the letter A, grades with the letter B, and also grades with the letter C.
Each of these grades has classifications. For example, the letter A is classified into Aaa, which is divided into (1, 2, and 3), so that the lowest number is the best level of the levels of this classification, and so are the grades of Aa with its three branches, then the grade A alone with its branches as well. The same happens with letter grades B and C
Stifling crisis
Egypt is facing a stifling economic crisis related to the shortage of foreign exchange, after the repercussions of the Corona pandemic and then the outbreak of the Russian-Ukrainian war in February of last year, and the exit of about 22 billion dollars in hot money, and despite the sharp devaluation of the pound 3 times in the period from March 2022 to last March, The crisis is still ongoing.
Egypt imposed restrictions on imports in light of the shortage of foreign currencies, and at least two banks suspended the use of debit cards in pounds outside the country to stop the bleeding of currencies.
Egypt, which is preparing to hold presidential elections in December, devalued its currency by more than half during the year ending in March.
In a related context, a report issued by the Central Bank of Egypt showed a sharp decline in financial transfers from Egyptians residing abroad by about 44 percent to $4.63 billion from $8.29 billion in the quarter from April to June 2022.
Analysts say that many Egyptians abroad who expect an imminent devaluation of the currency have stopped sending their savings or sent them through the parallel market, that is, without officially registering them.
During the last fiscal year, remittances from Egyptians working abroad fell by about 31 percent to $22.1 billion, compared to $31.9 billion in the previous fiscal year, according to Central Bank of Egypt data.
Egypt: The current account balance achieves a surplus
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2023-10-06 03:11:27
