Moody's Raises Egypt's Credit Rating to B2

Moody's raised on Thursday Egypt's credit rating to B2 from B3, with a stable outlook, against the backdrop of several factors.

Moody's said in a press statement that Egypt's fiscal policy reforms prompted a stronger growth potential and a gradual reduction in debt, confirming its ability to cope with any external imbalances.

The decision to raise the rating arises as Moody's

expects a gradual, yet, stable progress in Egypt's fiscal policies, prompting growth rates.

In addition, Moody's estimates that public debt would fall to less than 80 percent of the Gross Domestic Product (GDP) by the end of the fiscal year 2020/2021, compared to 92.6% in the preceding one.

The agency explained that the maintenance of structural reforms will enable the Central Bank of Egypt (CBE) to reduce inflation to a single digit, enabling the gradual reduction of borrowing costs.

Natural gas exports also supported the reduction of borrowing, generating a slide in the current account deficit.

In the medium term, debt sustainability and a reduction in the overall financing requirements were marked, resulting in effective debt management.

Moody's also predicted an initial surplus of 0.8 percent and an improvement in the government's fiscal balance reaching 7.5 percent and 6.8 percent of GDP over the next two years consecutively as well as a 2 percent primary surplus of GDP in the medium term.

Egypt is expected to have a growth rate of 5.5 percent in the next fiscal year, and will continue to increase hitting 6 percent in the next few years," Moody's added.

The strong growth rates would play a big role in driving a lower unemployment rate, which already registered 8.9 percent last December, near the lowest levels of 2003.

Meanwhile, Moody's raised Egypt's foreign currency rating to B2. It also adjusted the foreign currency bonds to B1, foreign currency deposits to B3, and the bonds and deposits in local currencies to BA1.