Fitch Rankings upgraded Egypt’s long-term foreign-currency Issuer Default Ranking (IDR) from B- to B with a secure outlook on Friday, 1 November.
The company cited the restoration in Egypt’s web overseas asset place, supported by an increase in worldwide reserves from USD 11.4 billion (EGP 555.42 billion) in March to USD 44.5 billion (EGP 2.17 trillion) by the tip of the third quarter of 2024.
This enchancment displays rising investor confidence, pushed by substantial overseas investments, together with the USD 24 billion (EGP 1.17 trillion) Ras El-Hekma undertaking and backing from Gulf Cooperation Council (GCC) nations.
The ranking improve aligns with current optimistic evaluations from different companies, together with Customary & Poor’s, which affirmed Egypt’s ‘B-/B’ ranking with a optimistic outlook over the previous two weeks.
Fitch expects overseas direct funding (FDI) inflows to common USD 16.5 billion (EGP 803.90 billion) yearly over the subsequent two fiscal years, supported by strategic initiatives and funding from Saudi Arabia and the UAE.
Regardless of projections that the present account deficit will widen to five.4 % of GDP in FY2024, it’s anticipated to slender to 4 % by FY2026, supported by a gradual restoration in sectors like fuel manufacturing and a partial rebound in Suez Canal revenues
Fitch additionally notes Egypt’s enhanced trade charge flexibility beneath IMF monitoring in its outlook, with no current overseas trade interventions by the Central Financial institution of Egypt.
Authorities debt is anticipated to lower to 78.9 % of GDP by FY2026, alongside a projected fall in inflation charges to 12.5 % by the tip of FY2025.
Financial progress is anticipated to speed up from 2.4 % in FY2024 to 4 % in FY2025 and 5.3 % in FY2026.
An IDR is a monetary report card exhibiting how properly a rustic can repay loans from different nations or establishments. It displays the nation’s capability to deal with its funds responsibly and meet its debt obligations.
Egypt has applied an bold financial reform agenda over the previous decade, aiming to stabilize its financial system, entice overseas direct funding, and enhance fiscal well being.
Main milestones embody floating the Egyptian pound in 2016, introducing a VAT, and slicing subsidies, which allowed Egypt to safe a USD 12 billion (EGP 584.7 billion) IMF mortgage.
The federal government has since launched the Nationwide Structural Reform Program (NSRP) in 2021, focusing on sectoral diversification by boosting industrial, agricultural, and IT sectors. These reforms, alongside initiatives just like the Ras El-Hekma improvement, purpose to draw additional investments and scale back reliance on imports
This improve marks a shift from a previous downgrade by Fitch in November of final yr when Egypt’s IDR was lowered from ‘B’ to ‘B-’. On the time, Fitch cited rising monetary pressures and elevated authorities debt as causes, alongside reliance on imports and delays within the IMF program assessment.
