Moody’s downgrades Egypt’s rating to ‘B3’

Moody’s Investors Service cuts Egypt’s sovereign rating by one notch to B3 from B2, saying that it does not expect the country’s liquidity and external positions to rebound quickly.

The change comes as the Arab country has continued to face a foreign currency shortage despite allowing the Egyptian pound to depreciate sharply in recent months.

The stable outlook reflects the balance between the up and downside risks. Downside and liquidity risks underscore tight global capital market conditions, higher domestic borrowing costs, and social spending pressures in an inflationary environment.

The agency also projects that these risks can be reduced by the government’s domestic funding base and track record of regularly generating primary surpluses. It believes that such measures will help ease the debt burden after a temporary setback.

Moody’s also lowered Egypt’s local-currency ceilings to Ba3 from Ba2. The cut underlines Egypt’s reduced external buffers to absorb global shocks amid the current economic changes worldwide.