Moody's changes its outlook on Egypt to negative

New York, US – Moody's Investors Service has changed the outlook on Government of Egypt to negative from stable and affirmed the Caa1 long-term foreign and local currency issuer ratings. Moody's has concurrently affirmed Egypt's foreigncurrency senior unsecured ratings at Caa1, and its foreigncurrency senior unsecured MTN program rating at (P)caa1.

In addition, Moody's has affirmed the backed senior unsecured ratings of the Egyptian Financial Corporation for Sovereign Taskeek sukuk company at Caa1 and its program rating at (P)caa1 which are, in Moody's view, ultimately the obligation of the Government of Egypt.

The change in outlook to negative reflects increasing risks that Egypt's credit profile will continue to weaken amid difficult macroeconomic and exchange rate rebalancing, despite continued fiscal consolidation efforts and official sector support.

Since the rating agency's last rating action in October 2023, a significant increase in interest payments (projected to consume two thirds of revenue at the end of fiscal 2024) and mounting external pressure (with the gap between the official and parallel market exchange rates widening further) have complicated the macroeconomic adjustment process.

Even with an anticipated increase in financial support from the IMF and the government's continued commitment to primary surpluses, the negative outlook reflects the risk that policy actions and external support may prove insufficient to prevent a debt restructuring given Egypt's very weak debt metrics and elevated exposure to foreign exchange and interest rates risks, even though a restructuring in the near term is not Moody's current baseline expectation.