RIYADH: Egypt’s external vulnerability risk has increased amid non-resident capital outflows triggered by the Russian invasion of Ukraine, according to Moody’s.
Egypt’s net foreign asset position fell by $13.7 billion to negative $5.1 billion in March amid non-resident capital outflows, according to data from the central bank.
With liquid foreign exchange reserves at $29 billion by the end of March, a similar reduction of $13.7 billion would reduce the reserve stock to around $15 billion.
That level would undermine external debt service coverage over the next 12 months, which Moody’s estimated at about $30 billion in fiscal year 2022 ending on 30 June.
Recently, Egypt has officially requested an International Monetary Fund program, which Moody’s expects will close the country’s wider account deficit, estimated at 5.4 percent of gross domestic product in fiscal year 2022, versus 4.6 percent in the previous 12 months.
Higher exposure to non-resident creditors in the domestic debt market increases external vulnerability risks, unless it is backed by a commensurate foreign exchange reserve buffer, the credit rating agency explained.