Yesterday, Tuesday, Moody's downgraded Egypt's sovereign rating by one notch to "B3" (B3) from "B2" (B2), pointing to a decline in its foreign exchange reserves and a decrease in its ability to absorb external shocks.

The agency lowered Egypt's local currency ceilings to "Ba3" from "Ba2", and said it did not expect a recovery in liquidity in Egypt and a rapid improvement in its external situation.

Egypt continues to face a shortage of foreign exchange despite allowing the Egyptian pound to depreciate sharply the past few months, while the economy undergoes a structural change towards a private sector-led growth model under a flexible exchange rate regime.


Moody's said that the strategy to sell state-owned assets, announced by the government, and that begins this month within the new International Monetary Fund program, will support the generation of sustainable non-debt-related capital flows to meet the increasing external debt service payments, but indicated that these measures will take "time to reduce the risks." tangible external weakness of Egypt.

Furthermore, despite the clear commitment to a fully flexible exchange rate, the government's ability to manage the effects on inflation and social stability has not yet been achieved, she added.

Prices continue to rise

Meanwhile, a poll conducted by Reuters yesterday, Tuesday, showed that the general inflation rate in Egypt is expected to have continued to rise last January, after it jumped to its highest level in 5 years last December, with prices continuing to rise after The Egyptian pound has depreciated several times over the past 10 months.

The average forecast of 14 analysts showed that annual inflation may have reached 23.75% last January, up from 21.35% in the previous month, which was the highest since December 2017.

And 5 analysts expected core inflation to rise to 26.6% from 24.4% last December.


Goldman Sachs - which expected inflation to reach 23.8% - said, "Our monitoring of domestic prices shows that prices continued to rise steadily in January for most basic commodities, including rice, edible oils, sugar, meat and poultry."

He added - in a note - that a possible increase of up to 10 percent in fuel prices at a quarterly meeting of the government fuel pricing committee could reduce the pace of inflation reduction.

Egypt reduced the exchange rate of its currency by about 50% in several stages, from March 2022 until last month, from 15.7 pounds to the dollar, to about 30 pounds now.

A significant rise in inflation would put pressure on the Monetary Policy Committee of the Central Bank of Egypt to raise interest rates at its next meeting on March 30.

At its most recent meeting on February 2nd, the committee kept interest rates unchanged and said it believed an 800 basis point rate hike over the past year would counteract inflationary pressures.

The Central Agency for Public Mobilization and Statistics is scheduled to announce inflation data next Thursday morning.