Moody's Investor Service maintained Egypt's long-term and senior unsecured bond rating at B3, a highly speculative non-investment grade, as government finances remain weak and the impact of the country's reform program remains unclear. The rating agency also affirmed its stable outlook on the country's main credit rating.
"The rating affirmation is based on Moody's view that the B3 rating appropriately captures Egypt's credit risk profile. Very weak government finances will continue to constrain the rating pending further clarity on the sustainability and impact of the reform programme," the rating agency said.
"While Egypt's external liquidity position has significantly improved over the past 12 months, the increase in international reserves has been mainly driven by debt-creating inflows, thus also raising the level of external debt and foreign-currency denominated debt.
Egypt in November unlocked a $12 billion International Monetary Fund loan by devaluing its currency and reducing energy subsidies. While the move help attract capital flows into the country and net international reserves rose by $4.7bn to a record $36.04bn last month, the economy has struggled under price inflation not seen in decades. The rate of inflation soared to a 31-year high last month as a spate of subsidy cuts lifted the price of goods and services. That led to a slowdown in spending as the price of goods and services sky rocketed.
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The probability of another uprising in Egypt following years of political turmoil was unlikely, the agency said, adding that for the country to see an improvement in its credit rating the pace of the reform program needs to accelerate.
"Faster-than-currently expected progress under the reform programme would be credit positive. In particular, more rapid fiscal consolidation and improvements in debt metrics, while preserving social stability, would be a key driver for a potential positive rating action," Moody's said in its report.
"In addition, early signs of successful implementation of structural economic reforms would include rising FDI inflows, increasing exports in higher value-added goods, and a meaningful reduction in unemployment."
