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Inflation, Rising Debt Risks Change Egypt’s Outlook to Negative: Moody’s

May 28, 2022

Moody’s Investors Service has changed Egypt’s outlook to ‘negative’ from ‘stable’, in its updated 2022 market outlooks, which means Moody’s is more likely to cut its rating. This change comes as a result of the country’s constraints in receiving money inflows and meeting the external debt service payments in the context of high inflation and tightening financial conditions due to the Ukraine conflict, the agency said in a statement on Thursday. The increase in food price inflation could also raise social tensions and political risk, and rising domestic borrowing costs also increase liquidity risks and debt affordability challenges. Though the government’s privatization strategy targets 10 billion USD in foreign direct investment (FDI) inflows annually over four years, Moody’s Investors assess that the “likelihood of renewed large-scale inflows is low”, as weak debt affordability will be worsened by higher domestic borrowing costs amid rising inflation. Egypt’s ESG (Environmental, Social and Governance) Credit Impact Score (CIS-4) is highly negative due to high exposure to environmental and social risks respectively, and the high debt burden constrains the government’s capacity to respond to environmental and social risks. The negative score also mainly relates to…

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