Moody’s upgrades outlook on Egypt to positive as it reaffirms long-term issuer rating at B3: Moody’s Investor Service reaffirmed Egypt’s long-term issuer rating at B3 and upgraded its outlook to ‘positive’ from ‘stable,’ saying the decision reflects improvements in the economic and business environment as a result of the ongoing economic reform program, the ratings agency said in a release (pdf). The agency notes that despite existing challenges — mainly refinancing risks created by a high debt burden and, to a lesser extent, the risk of political upheaval — “early signs of business environment reforms offer the prospect of a sustainable, inclusive growth path capable of improving competitiveness and absorbing the country’s rapidly expanding labor force.”

Egypt is on the right track. Commitment to reform measures — including the float of the EGP and the legislative and structural changes — have already led to a primary budget surplus for the first time in years, higher FX reserves, and improved GDP growth levels that should increase over the coming months. The government’s drive to optimize its finances, by restructuring subsidies and taxes, is also expected to help decrease the debt burden over time, which should help improve Egypt’s credit profile.

While a reversal in Egypt’s current rating seems unlikely, any stalling in the reform program risks changing the outlook back to ‘stable’. Moody’s said it would ”monitor the government’s progress in achieving planned fiscal, monetary and economic reforms; its success in sustaining external investor confidence as reflected in trends in foreign reserves and foreign direct investment; and the social acceptance of the government’s reform program and the absence of pressures that could eventually halt or reverse economic and fiscal reforms.”