Global credit rating agency Moody’s Investors Service has altered the outlook for five Egyptian banks, bringing their long-term deposit ratings to negative from stable.
These five banks are the National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank Egypt, and ALEXBANK.
Moody’s added in the statement that it has maintained the long-term deposit ratings of three state-owned banks, namely National Bank of Egypt (Al Ahly), Banque Misr, and Banque du Caire, as well as Commercial International Bank Egypt at “Caa1”, and it has also upheld the rating of Alexandria Bank at “B3”.
Egypt faces hard economic pressures
The Moody’s credit rating agency anticipates that Egypt will face significant pressures in 2024 for both debt and financial liquidity.
In its report on the Middle East and North Africa region, the agency added that it expects a further depreciation of the official exchange rate of the Egyptian pound, as indicated by prices in the parallel market.
“For reasons including currency depreciation, we expect inflation to remain very high in Lebanon, while it will register a double-digit figure in Egypt,” the report explained.
It added that a combination of “depreciation of the local currency, rising inflation, and interest rates will dampen consumption and investment in Egypt.”
Over 60 percent of revenues in Egypt will continue to be directed to interest payments in the fiscal year ending June 2024, leaving the government with very limited financial flexibility to respond to shocks – such as those arising from the clashes between Israel and Hamas in Gaza.
Egypt’s Finance Ministry assured that the government is working to manage macroeconomic risks with flexibility to contain successive external shocks, and is dealing in a balanced and careful manner with the negative impact of geopolitical tensions on economic activity.
Commenting on Moody’s fixing Egypt’s sovereign credit rating at “Caa1” while changing the future outlook to negative, the ministry said that Moody’s decision did not take into account the government’s current efforts.
It explained that the IPO program enhances “our ability to meet financing needs during the next two years, and contributes to attracting more investment flows and reducing the need for external financing.”
The ministry noted the state’s success in exiting some economic activities worth US$3.5 billion within the IPO program, which will help increase foreign exchange flows to cover the needs of the Egyptian economy.