Fitch's downgrade of Egypt's credit rating reflects geopolitical tensions: Finance minister

Ahram Online , Saturday 4 Nov 2023

Minister of Finance Mohamed Maait said that Fitch's latest move lowering Egypt’s credit rating reflects the country’s struggle against extreme external pressures resulting from complex global challenges including geopolitical tensions, according to a statement on Saturday.

The Fitch Ratings logo is seen at their offices in the Canary Wharf financial district in London, Br
The Fitch Ratings logo is seen at their offices in the Canary Wharf financial district in London, Britain, March 3, 2016. REUTERS


Maait emphasized that the government has identified sources for $4 billion in external financing through the end of FY2023/24.

Moreover, the government aims to diversify in international markets, particularly after the successful issuance of Samurai and Panda bonds in Asian markets.

Fitch's decision

Global rating agency Fitch downgraded Egypt's long-term foreign currency issuer default rating (IDR) from B to B-, changing the outlook to stable, according to its report on Friday.

The agency cited increased risks in Egypt's external financing, macroeconomic stability, and the trajectory of the already-high government debt as the key factors behind the downgrade.

Fitch's stable outlook reflects its expectation that following presidential elections in December, reforms, a slowdown in megaprojects, and exchange rate adjustments will gather momentum. These factors are likely to accelerate the implementation of the International Monetary Fund (IMF) programme.

Egypt's current economic crisis, marked by currency devaluations and record inflation, has exacerbated the country's debt problems.

Notably, the stability of the official exchange rate since February contradicts the Central Bank of Egypt's (CBE) commitment to a durably flexible exchange rate, as noted by Fitch.

The report further highlighted that Egypt is expected to face a significant rise in external debt maturities in the fiscal years 2023/2024 and 2024/2025.

Additionally, Fitch identified the Israel-Hamas war as a significant downside risk to Egypt's tourism sector.

"However, these have stabilized since the beginning of 2023, highlighting substantial resilience to shocks," the report added.

Maait also asserted that Egypt has the capability to meet external financing needs, showcasing flexibility in the face of internal and external challenges arising from geopolitical tensions.

He highlighted the increase of foreign investment to $10 billion in FY2022/23, adding that the number is expected to rise to $12 billion in the current fiscal year.

The Suez Canal generated revenues of $10 billion in the last fiscal year, he added, saying that they hope to reach $12 billion in FY2023/24.

Egypt's IPO programme has delivered significant results, with the successful exit of the state from various economic activities valued at $2.5 billion in the first quarter of FY2023/24.

Similar decisions

In October, fellow credit rating agencies Moody's and Standard & Poor's (S&P) downgraded Egypt's credit ratings from B to B1 and from B3 to Caa1, respectively, with both saying the outlook was stable.

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