Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

Egypt, Pakistan Await Result of Emerging-Market Status Classification

Thu 28 Mar 2024 | 12:04 AM
Taarek Refaat

Egypt and Pakistan both face the threat of losing their emerging market status, and the two countries will find out on Wednesday whether their economic transformation plans are enough to avoid a downgrade in the FTSE Russell index, while Vietnam awaits an elusive upgrade.

FTSE Russell will announce the results of its first ratings review in 2024 after the close of trading in New York. The ratings influence where the $15.9 trillion in funds that track the company's indices invest, especially in emerging and frontier markets.

In September, the FTSE Russell put Egypt's rating on watch for a possible downgrade of two notches to so-called unrated status, while Pakistan risks being downgraded one level to be classified as a frontier market.

Vietnam has been on the frontier market list since 2018 and is awaiting promotion to the secondary emerging market level, the third of the company's five levels.

The review takes place as markets begin to emerge from the post-Covid debt distress saga, amid a wave of economic reforms sweeping frontier nations from Argentina to Vietnam. Backed by billions from the International Monetary Fund, the best performers in bond and stock markets were some of the most vulnerable economies, such as Egypt, Pakistan and Ecuador.

“It is likely that the timing for downgrading the credit ratings of Egypt and Pakistan has passed after both received foreign inflows,” said Hasnain Malik, a strategist at Telemer in Dubai. Moreover, IMF disbursements and monetary policy reforms have enhanced market liquidity and reduced capital controls risks, he added.

MSCI, FTSE Russell's main competitor, classifies Egypt as an emerging market, while Pakistan is classified as a frontier market. Vietnam is seeking an upgrade in both indicators.


Egypt was facing its worst economic crisis in decades when FTSE Russell said last year it was considering downgrading the country's stock market, citing complaints about delays in capital transfers.

Since then, the country has received bailout packages worth more than $57 billion from the UAE, the International Monetary Fund and the European Union. Foreign inflows, combined with currency devaluation and higher interest rates, removed pressures on the country's reserves, paving the way for smoother capital transfers.

Investors welcomed the change, and Egyptian stock prices and dollar bond yields rose respectively by 17% and 22% this year.


The biggest problem Pakistan has faced since 2017 has been the continuous erosion in market size. However, the country has begun to witness a recovery since September, with the market adding about $11 billion in shareholder wealth. FTSE Russell will examine whether Pakistani stock prices have risen again above the minimum market size it uses for continued emerging market status.

The country's stock prices have risen 5.7% this year, outperforming their emerging market counterparts. Dollar bond yields reached 28%, the third best performance in this asset class.