Moody's upgrades Egypt outlook to stable

21 October 2014

Increased political stability drives decision by ratings agency

Egypt’s outlook has been upgraded from negative to stable by US ratings agency Moody’s Investors Service, reflecting the perceived improvement in the country’s political and security situation.

The agency maintained and reaffirmed Egypt’s government bond rating of Caa1.

A potential upgrade of this rating would require reductions in the country’s high fiscal deficits, government debt and fiscal borrowing needs, the agency says.

Since the beginning of this year, several developments have ensured Egypt’s risk profile has improved. These include the constitutional referendum in January, which was seen as a step towards political reform.

The presidential election, which saw ex-army chief Abdul Fattah al-Sisi come to power, has further strengthened the country’s stability, according to Moody’s.

Parliamentary elections are expected to be held in early 2015.

The country’s economy is showing some signs of recovery, with GDP edging upwards to 3.7 per cent year-on-year in the fourth quarter of the 2013/14 fiscal year, rising from 2.5 per cent the previous quarter.

The Suez Canal projects are also viewed as key schemes set to generate economic growth and employment for the coming years, says the agency.

Financial support from the Gulf region has also underpinned Egypt’s stability, bolstering the country’s budget and lowering the cost of government financing.

A total of $17bn in GCC grants and loans has been provided to Cairo and the Central Bank of Egypt during the fiscal year 2014, according to the Finance Ministry.

In mid-October, Egypt launched a new development strategy targeting 6 per cent economic growth over the next five years.

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