CAIRO - 3 November 2023: Fitch Ratings downgraded Friday Egypt's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B-' from 'B', with a stable outlook. This rating is attributed to increased risks to external financing, macroeconomic stability, and high government debt.
The stability of the official exchange rate contrasts with the Central Bank of Egypt's commitment to a flexible exchange rate, according to Fitch, adding that Egypt's external debt maturities are set to rise, and the current account deficit is expected to expand.
It noted that the country's reliance on foreign direct investment (FDI) has grown, while its debt trajectory remains a concern. Furthermore, the potential security risks stemming from regional conflicts and persistent high inflation are also contributing factors in the downgrade.
The rating agency elaborated that slow progress on reforms, including the delay on the transition to a more flexible exchange rate regime and on IMF programme reviews, have damaged the credibility of exchange rate policy, and exacerbated external financing constraints at a time of increasing external government debt repayments.
“Downward pressures on the currency have increased, and the path to policy adjustment has become more complicated.” it added.
According to Fitch, the Stable Outlook reflects the agency’s baseline expectation that reforms - including privatization, slowdown of megaprojects, and exchange rate adjustment - will accelerate after presidential elections in December, likely paving the way for a new and potentially larger IMF programme and additional support from the Gulf Cooperation Council (GCC).
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