Moody’s downgrade puts Egypt on par with Nigeria

Moody’s Investors Service has cut the long-term foreign and local currency issuer ratings of the Government of Egypt to Caa1 from B3 and changed the outlook to stable.

The downgrade puts the country on par with Nigeria, whose credit ratings were lowered further in January into the non-investment grade category, popularly known as “junk”.

Moody’s downgraded Egypt’s foreign-currency senior unsecured ratings to Caa1 from B3, and its foreign-currency senior unsecured medium-term note  program rating to (P)Caa1 from (P)B3, according to a statement on Thursday.

It also cut the backed senior unsecured ratings of the Egyptian Financial Corporation for Sovereign Taskeek sukuk company to Caa1 from B3 and its program rating to (P)Caa1 from (P)B3 which are, in Moody’s view, ultimately the obligation of the Government of Egypt.

“The downgrade reflects the government of Egypt’s worsening debt affordability trend and the persistence of foreign currency shortages in the face of increasing external debt service payments over the next two years, amid increasingly constrained policy options to rebalance the economy without exacerbating social risk,” the rating agency said.

It said the stable outlook captured the government’s track record of fiscal reform implementation capacity and the launch of the asset sale strategy, as well as Moody’s expectation of continued external financial support from the International Monetary Fund, subject to compliance with reform conditionality, and from the Gulf Cooperation Council.