Egypt reacts to credit downgrade
Egyptian Finance Minister Mohamed Maait reacted to the fact that Moody’s downgraded the rating of the Egyptian government’s long-term foreign and local currency issues to “B3” instead of “B2”.
The Egyptian minister confirmed that the government had responded positively to the concerns contained in the Moody’s report, which ended with a downgrade of Egypt’s “credit rating” to B3 with a stable outlook for the future, despite the comprehensive measures, policies and measures taken by the government that contributed to the establishment of the “Standard & Poor’s”. Over the past two weeks, Egypt’s credit rating has been affirmed with a stable outlook, especially in light of the commitment to the pace of economic reforms supported by the International Monetary Fund, with the agreement extended to 48 months.
The Egyptian minister said that, in continuation of what has been achieved in past years, including in the 2021/2022 financial year, the overall deficit reached 6.1% of GDP compared to 6.8% in 2020/2021, and was achieved primary surplus for the fifth consecutive year of 1.3% of GDP in fiscal year 2021/2022.
The minister noted that the Suez Canal received what is considered the highest revenue in history, reaching $7 billion and is expected to reach $8 billion in 2023. Last January, he also earned the highest monthly income in his history at $802. annual growth of 47%. Tourism sector revenue rose to $10.7 billion over the past year on the back of strong inflows from various markets such as the Gulf States, Germany and Poland, in addition to a 71% increase in foreign direct investment revenue to about $9.1 billion. compared to about $5.2 billion the previous year, as well as their diversity among many sectors, the most important of which are: manufacturing, construction, communications and information. technologies.
The minister said the Moody’s report indicates expectations of a gradual decline in Egypt’s current account deficit to around 3% in the next fiscal year 2023/2024, compared to around 3.5% in fiscal year 2021/22, indicating a significant improvement in current account performance. .In fiscal year 2021/22, non-oil export revenue achieved a strong growth of 29% per year, in light of the increase in exports of fertilizers, medicines and ready-made clothing A large surplus in the oil trade balance of $4.4 billion was achieved in light of the expansion of exports natural gas, which recently reached a monthly revenue of about $700 million.
Moody’s also downgraded its unsecured foreign currency rating to ‘B3’ and downgraded its Unsecured Medium Term Foreign Currency Bond Program to (P) ‘B3’.
The corporation attributed the downgrade to ‘B3’ to the country’s declining ability to absorb shocks from reduced external support, while the economy is undergoing structural changes towards a private sector-led growth model and heavily dependent on exports under a flexible exchange rate system. currencies.
Liquid foreign exchange reserves have declined since Moody’s announced its negative outlook in May 2022, and foreign liquidity coverage ratios in the monetary system have worsened (measured by increases in net foreign exchange liabilities of the central bank and commercial banks), resulting in to increased exposure to external risks during a crisis Unsustainable and fragile global conditions.