Finance Min. Responds to Fitch's Decision to Downgrade Egypt's Rating

Egyptian Finance Minister Mohamed Maait responded to Fitch's decision to downgrade Egypt's credit rating in both local and foreign currencies to "B" with a negative outlook.

The minister pointed out that the downgrading reflects the institution's view of the external financing estimates needed by the Egyptian economy amid unfavorable global financial market conditions for all emerging countries, due to the global wave of inflation, the rise in interest rates, and the cost of financing due to the restrictive policies of central banks around the world, which led to a wave of capital outflows from emerging markets.

Maait added that the Egyptian economy attracted huge sums of foreign investments during the first half of the fiscal year and also attracted financial resources from several international institutions.

Fitch downgraded Egypt's rating from "B+" to "B", while downgrading its outlook to negative, which indicates that it may lower the rating further in the coming months due to the country's fiscal complications.

The credit rating agency spoke in a statement about the increase in external financing risks in light of the high financing needs and the tightening of external financing conditions, and said in a statement that "all this comes against the backdrop of a state of extreme uncertainty in the course of exchange rates and the decline in external liquidity reserves."

It pointed out that the occurrence of "further delay in the transition to the policy of flexible exchange rates will lead to a further deterioration in confidence and may also lead to a delay in the implementation of the International Monetary Fund (IMF) program."

Meantime, credit rating agencies and international institutions are pushing hard against the Egyptian government to further devalue its currency, which was already devalued four times, calling it a liberalization of the currency's exchange rate.

Egypt has devalued its currency from EGP 8.86 in 2016 to EGP 30.27 in 2023 against the dollar, bringing inflation to its highest levels, and imports to its lowest level.

The minister explained that the report issued by "Standard & Poor's" indicates a significant improvement in the indicators of the current balance for the fiscal year 2021/22, as the proceeds of non-oil exports achieved a remarkable increase of 29% annually, in light of the increase in exports of fertilizers, medicines and ready-made clothes.

The minister said that a large surplus of $4.4 billion was recorded on the oil side, in light of the expansion in natural gas exports, which recently reached $600 million per month, and the Suez Canal achieved the highest historical revenue, amounting to $7 billion.

He pointed out that workers' remittances continued to achieve high revenues during the past year, which amounted to about $32 billion, and the revenues of the tourism sector increased significantly during the past year in light of the recovery of the sector, which achieved revenues amounting to $10.7 billion, with the diversification of tourism sources to witness flows from new markets.

"The proceeds of foreign direct investments increased by 71% to reach about $9.1 billion, compared to about $5.2 billion in the year 2020/21, in addition to the diversity of sources of foreign investments flowing to many sectors.