Declining inflation and a "credible monetary policy" have allowed Egypt's central bank to continue to reduce interest rates and the domestic cost of its borrowing, Moody's said. The lower borrowing costs, a diversified economy and relatively low foreign currency debt contributed to the country's stable outlook, the rating agency said in its annual credit analysis on Egypt on Wednesday. It has a "B2" sovereign rating on the North African country. "This credit outlook reflects the resilience of Egypt's credit profile against financing shocks despite high exposure, a positive for its credit profile. This is driven by its effective and credible government policies," Elisa Parisi-Capone, vice president and senior analyst at Moody's, said. "A lengthening track record of credible and effective fiscal, economic and debt management would also reflect positively on Egypt's credit profile." Egypt's main credit weakness remains its very large government financing requirement of 30 per cent to 40 per cent of gross domestic product annually, with high roll-over rates that potentially expose the economy to tightening domestic or external financing conditions, Moody's said. However, its limited exposure to foreign currency liabilities and its ample foreign exchange reserves, which can cover maturing external liabilities for the next three years, provide it with some protection from external shocks. The International Monetary Fund approved a request from Egypt in May for emergency financial assistance to help cope with the economic fallout from the Covid-19 pandemic. The $2.77 billion (Dh10.17bn) borrowed through a Rapid Financing Instrument was intended to address pressing financial needs in the most affected sectors, including health care, and to support vulnerable groups. The fund also approved a new 12-month $5.2bn loan in June to help Egypt deal with pandemic-related challenges and finance its budget deficit and balance of payments shortfalls. As with other countries, the pandemic has affected the livelihoods of Egyptians and led to a deterioration in economic conditions. The IMF expects economic growth to "slow down considerably" in 2020 to 2021 as the tourism sector and domestic activity weaken, it said in a report on Tuesday. "The external accounts are expected to deteriorate from portfolio outflows and the shock to tourism and remittances, resulting in an urgent balance of payments need," the fund said. Moody's said a "new bout of capital outflows which significantly erode the central bank's exchange reserves and threaten external stability" could lead to a ratings downgrade. On the other hand, further improvements in debt affordability and lower gross financing needs would result in a sovereign credit rating upgrade, the rating agency said. Securing jobs for people entering the labour market remains a long-term social challenge, despite a stronger employment market, the agency said.