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Moody’s Continues to Give Egypt Negative Rating: Expert Analysis Reveals 5 Problems and 3 Promising Values

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Moody’s Gives Egypt a Negative Rating: Expert Analysis

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Abu Bakr El-Deeb, a researcher in international relations and political economy, has highlighted the negative rating given to Egypt by rating agency Moody’s.

The Opinion on Egypt’s Sovereign Credit Rating

El-Deeb explained that Moody’s review of Egypt’s sovereign credit rating in national and foreign currencies, along with the future outlook, has resulted in a “negative review” for the next three months. This review brings attention to 5 problems, including a potential devaluation of the pound, but also acknowledges 3 positive factors.

Positive Factors Recognized by Moody’s

Moody’s has commended the Egyptian government for its ability to increase revenues and primary surplus, implement supportive structural reforms, eliminate tax and customs exemptions, and enhance economic and investment activities. These reforms contribute to the government’s recent progress and stimulate investment, improve the business environment, and empower economic growth.

Potential Depreciation of the Egyptian Pound

Moody’s has proposed a new depreciation of the Egyptian pound by approximately 20%, which could lead to higher inflation, borrowing costs, and public debt. This potential depreciation may result in a credit rating downgrade for Egypt.

Foreign Exchange Challenge and Economic Reforms

Egypt faces a challenge in providing foreign exchange due to the increase in imports compared to exports. The appreciation of the dollar and depreciation of the pound have led to higher prices of goods and services, as well as decreased foreign direct investment flows. However, Egypt has implemented economic reforms to attract investment, including raising interest rates and addressing the currency supply-demand gap.

Moody’s Extended Review and Focus Areas

During its extended review of Egypt’s credit rating, Moody’s will examine the impact of asset sales on liquidity restoration, the government’s ability to secure foreign exchange payments under the International Monetary Fund program, and the effectiveness of financial and business environment reforms. The recent increase in foreign exchange reserves by $72 million in July contributes positively to Egypt’s economic outlook.

Conclusion

Despite the negative rating from Moody’s, Egypt continues its economic reform program and strives to address the challenges it faces. The government’s efforts to attract investment, increase foreign exchange reserves, and implement structural reforms are crucial for the country’s economic growth and stability.

Source: RT

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