A general view of Cairo, Egypt. AFP
The global rating agency has affirmed Egyptian sovereign short-term foreign and local currency ratings at B.
Foreign and local currency ratings take into account the economic, financial, and country risks that may affect creditworthiness, as well as the likelihood that an entity would receive external support in the event of financial difficulties.
A B rating signifies a big risk of failing to pay debts on time under adverse circumstances inside or outside the country.
CI Ratings based its decision on Egypt’s financing shortage and the uncertainty regarding the country’s ability to secure external funding. The rating agency said that the government's initial public offering (IPO) programme has been moving at a modest pace and that the “strengthening of the exchange rate credibility” has been delayed.
The rating may be improved due to the possibility for Egypt to secure funding from the IMF or Gulf countries, CI said.
“The stable outlook indicates that the ratings are likely to remain unchanged over the next 12 months. The outlook balances Egypt’s large external financing needs with our assumption that continued asset sales and a narrower current account deficit will help to gradually strengthen the country’s foreign reserve buffer,” the rating agency stated.
Egypt seeks to tackle a critical shortage of US dollars from which it has suffered for almost a year and a half, to bridge an estimated $17 billion financing gap until 2026.
The government has secured $5 billion from selling state-owned assets in the past month, with $5 billion worth of new deals planned as part of a national privatization programme.
The programme is part of Egypt's commitments under its $3 billion loan programme with the International Monetary Fund (IMF).
The country seeks to accelerate the implementation of the IPO programme to finalize the first and second reviews of the deal, which Morgan Stanley expects to be conducted in the coming months.