Moody’s said that the upgrade was due to the continuous positive developments. Moody’s said that the positive indicators are mainly, the continued improvement in external liquidity, the strengthened ability of the country's resilient banking system to finance fiscal deficits, and an improvement in the political situation with the formation of a consensus government in November.
Tristan Cooper, Moody’s Vice President for Middle East sovereigns, said that “confidence in the financial system has been bolstered by the central bank’s growing cushion of foreign exchange reserves, and its effective regulation of domestic banks."
Cooper said that the “public finances have proven resistant to economic and political shocks due to the strengthened resilience of the banking system.”
Moody's said that the country is in a favorable position to absorb financial shocks, mainly due to the rise in foreign exchange reserves to $24.1 billion in end of October from $9.8 billion at the end of 2007, and the large amount of gold that the central bank holds which reached $9.6 billion in October.
Moody’s said that commercial banks are well-capitalized, and have continued to attract deposits from abroad. Total bank deposits increased by around 20 percent in the 12 months to October. Moody's said that banks displayed a high level of stability, and were not exposed to toxic financial during the global financial crisis, partly because of stringent central bank regulations. It said that the bulk of banking deposits comes from the large and “loyal” Diaspora.
Moody’s said that despite the recent improving trends, significant political and economic vulnerabilities still outstand. Cooper said that among the weaknesses include, “the wide twin deficits, the very high public burden, the tense domestic political environment, and the precarious geopolitical location.”
The rating agency said that “it remains concerned by the sluggish progress in implementing much-needed economic reforms.” It warned that there is no guarantee that the government's weak policy effectiveness will improve despite the formation of a consensus government.
Moody’s said that the upgrade of the rating to B1 will be linked to other positive developments mainly “the further strengthening of the government's ability to finance its wide fiscal deficit, and a further improvement in the government's poor debt affordability metrics”