Egypt faces challenges including stretched public finances and high public debt, Moody’s Investors Service said today after earlier cutting its ratings on the North African nation’s debt.
“Egypt suffers from deep-seated political, socio-economic challenges,” Moody’s said in a statement. “These include chronic high rate of unemployment, elevated inflation, widespread poverty.”
Moody’s on March 16 downgraded Egypt’s foreign and local currency government bond ratings by one notch to Ba3 from Ba2. The outlook on these ratings remains negative.
“Public finances in Egypt, already stretched, are significantly weaker than Ba rating peers,” Moody’s said.
Countering the negative trends, Egypt has a relatively diversified economy, is a small net exporter of hydrocarbons, retains a significant level of foreign exchange reserves and most government debt is denominated in local currency and held by domestic creditors, Moody’s said.
Financial support from “well-disposed” donors, especially the U.S., and discussions with the International Monetary Fund concerning a possible loan package also support Egypt’s ratings, Moody’s said.
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