Egypt defends the capacity of its economy after Fitch lowered its debt rating

Egypt defended today the “capacity” of its economy to resist the crisis it has been going through for years, after the agency of Fitch Ratings It lowered the rating of its long-term debt to B negative and thus joined others such as Moody’s or S&P in lowering its confidence in the country.

”The Egyptian economy is still capable of meeting external financing needs,” Egyptian Finance Minister Mohamed Maiet said in a statement responding to the latest report from Fitch.

The minister stated that his country “has the possibility of obtaining around $5 billion annually on favorable conditions from multilateral development banks.”

Although he did not disclose details, he considered that this “possibility” is an “indication of the confidence of these international institutions in the financial policy of the Egyptian government (…) to reduce debt and deficit rates (…) and maintain a sustainable primary surplus, in addition to structural reforms” with which “more space is given to the private sector as an engine of comprehensive development.

He also said that Egypt “has identified sources to cover external financing needs until the end of the current fiscal year, estimated at $4 billion,” and has issued bonds in Japanese and Chinese currencies for a value equivalent to $1 billion.

Among other sources of financing, the minister highlighted the income from the Suéz Canal, which he expects to increase to $12 billion this year, compared to $10 billion in 2022, and foreign investment that would also reach $12 billion with the program. of privatization.

In a report published on Friday, Fitch placed Egypt at a level where “the risk of default is present,” and where “there is still a limited margin of safety.” However, the outlook is negative.

This is the third consecutive assessment of Egyptian sovereign debt in which Fitch has downgraded the rating.

”The downgrade reflects the growing risks of Egypt’s external financing, its economic stability and the trajectory of its already high government debt,” the report says.

Just two weeks ago, the rating agency S&P brought the Egyptian debt closer to the “junk bond” categories, given the problems in accessing foreign currency and doubts regarding the sustainability of its debt, while on November 8 the agency Moody’s which lowered its rating to leave it one step away from non-payment.

The economic crisis of Egyptwith a population of more than 105 million inhabitants, has worsened significantly after the Russian invasion of Ukraine and global inflation, and whose repercussions have affected a significant part of the population of the North African country, in the midst of inflation close to of 40%.

The severe shortage of foreign currency forced Cairo to go again to the International Monetary Fund (IMF) in search of new aid programs, which join the other two multi-million dollar loans that it has already requested since 2016.

However, this latest loan requires the liberalization of the exchange rate, the reduction of public subsidies and greater privatization of sectors dominated by public industries, something that Egypt has not yet done so, which has prevented the disbursement of that money.

Currently, the Arab country has an external debt of 165.3 billion dollars, of which it must pay about 29 billion in the next fiscal year and up to 71,000 in the next three years.

Its foreign exchange reserves are close to $35 billion, the vast majority of which are deposits from Saudi and United Arab Emirates sovereign funds.

(With information from EFE)