Moody’s said that Egypt’s inability to implement any asset sale deals will have repercussions on the economy.
In a statement, the agency hinted at the possibility of downgrading Egypt’s credit rating for the second time this year, in case the country’s external situation continues to deteriorate.
It pointed to what it said was the slower-than-expected progress of the offering program, which it indicated threatened financing plans in Egypt, weakening foreign exchange liquidity, and undermining confidence in the currency.
She added, “This would prompt a downgrade of the country’s rating, while the ability to generate inflows in foreign currency, especially through offerings, is essential to stabilizing the country’s credit rating.”
She said that the review period will focus on the government’s ability to complete the targeted asset sales, amounting to $2 billion, needed to meet the financing goals of the International Monetary Fund’s program for fiscal year 2023, and to prove the feasibility of the program’s external financing strategy, which relies heavily on asset sales.
“The review period will also focus on the authorities’ ability to boost net international reserves, in accordance with the IMF’s three-month quantitative program targets, and support confidence in the currency,” it added.
The agency indicated that the triple gap between the local currency ceiling and the sovereign rating reflects the large footprint of the public sector in the economy, which impedes the development of the private sector, and credit allocation has been mitigated through a track record of implementing relevant structural and competitive reforms.
For his part, economic analyst Hani Genena said that the pace of negative reports has accelerated recently from two sides, foreign investment banks, after giving a red signal regarding external debt and its capacity, and the other signal was from the three rating agencies Moody’s, Fitch, and Standard & Poor’s.
He pointed out that there are reports from researchers, that investors in Egyptian international bonds began to exit from them, and the yield on them rose strongly, and this gave a red signal that Egypt is about to default on paying foreign debts within two years.
Genena said that the reports coincided with the date of reviewing the agreement with the International Monetary Fund, which was not completed, and it is clear that the government did not adhere to the terms of the agreement, including the liberalization of the exchange rate.