The ratings agency Moody on Thursday downgraded Egypt’s credit rating to a new low amid a severe economic crisis and an increase in sovereign debt.
Egypt has faced record inflation and foreign currency shortages in recent years, making it difficult for the North African country to repay its external debts.
The situation has been exacerbated by ongoing corruption and an eight-year borrowing spree which has seen the state spend money on “white elephant” projects such as the New Administrative Capital.
In 2019, an Egyptian businessman also accused current President Abdel Fattah Al-Sisi of using public funds to build luxurious palaces for himself and his family in a scandal known as “Palacegate”.
Moody’s downgraded Egypt’s credit rating from ‘B3’ to ‘Caa1’ meaning that Egyptian government bonds now carry a “substantial risk”. This is the lowest rating for the country ever.
However, the credit rating agency said that Egypt’s economic outlook was still “stable” due mostly to $3 billion in support from the IMF.
“Moody’s expects the materialization of asset sale proceeds at the central bank to help restore the economy’s foreign currency liquidity buffer,” it said.
Egyptian government bonds fell in value almost immediately after the downgrade, Reuters reported, but later bounced back.
Egypt’s Finance Minister Mohamed Maait said in a statement that the government was undertaking “structural reforms” to address the economic crisis and stimulate investment.
In March, Egypt devalued its currency to half its original value but the official dollar exchange rate is still much lower than the black market exchange rate.
At least two Egyptian banks have suspended the use of local debit cards outside the country in an attempt to stop the foreign currency drain.
As a result of the ongoing economic crisis, many Egyptians have embarked on risky attempts to migrate to other countries.
Source: The New Arab