Egypt credit outlook lifted to positive by S&P after currency devaluation

Egypt’s credit outlook was lifted to positive by S&P Global Ratings after a long-awaited currency devaluation was poised to ease foreign currency shortages.

The credit assessor moved Egypt to positive from stable and affirmed the rating at B-, six notches into junk and on par with El Salvador and Ecuador, according to a Monday statement.

This month, the country agreed to float the currency and hike interest rates, locking in a deal with the International Monetary Fund.

“We see the exchange rate liberalization, alongside Egypt’s stated commitment to stick to ambitious budgetary consolidation targets, as a key step in shoring up confidence and growth in Egypt’s economy and its debt sustainability,” analysts including Trevor Cullinan and Ravi Bhatia wrote.

The positive outlook also reflects that a foreign-exchange rate set by the market will drive growth, and over time, support the government’s fiscal consolidation plans.

Fitch Ratings has the nation at B- with a stable outlook, while Moody’s Ratings assigns Egypt a Caa1 with a positive outlook.