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Home » Fitch Downgrades Egypt to ‘B’ as Economy Reels

Fitch Downgrades Egypt to ‘B’ as Economy Reels

by Kan Khine
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Global rating agency Fitch has downgraded Egypt’s outlook to ‘B’ from ‘B+’. The outlook for the country remains negative.

According to Fitch’s Primary Rating analyst, Laure de Nervo, the main factors contributing to the downgrade include the country’s rising external financing risk due to financing requirements and its constrained external financing conditions.

“Uncertainty around Egypt’s ability to meet its external financing needs has increased, reflecting still constrained prospects for market access and the lack of market confidence in the Central Bank of Egypt’s (CBE) new exchange rate regime, which has held back foreign currency (FC) inflows,” the statement said.

The rating action also reflects a “marked deterioration of public debt metrics, including a renewed deterioration in government interest costs/revenue, which, if not reversed, would put medium-term debt sustainability at risk,” Fitch said.

Moody’s Investors Service also has warned about rising risks for the government’s debt affordability and debt-sustainability profile.

Egyptian economy has been battered by a fallout from the Russia-Ukraine war.

The nation’s headline inflation rate increased to 32.7% in March, according to statistics agency CAPMAS.

Surging inflation triggered by a series of currency devaluations that started in March 2022, has been roiling the economy.

There are concerns whether the government is pacing up the implementation of reforms, promised while securing a $3 billion lifeline from the IMF, though Prime Minister Mostafa Madbouly has been reiterating that the country is fully able to meet its debt obligations.

“We see a risk that a further delayed transition to a flexible exchange rate will further undermine confidence, and, potentially, delay the IMF programme,” the Fitch statement said.

The rating agency assumes that the exchange rate will depreciate further before stabilising in the financial year ending June 2024.

Last month, S&P Global Ratings lowered its outlook on Egypt to negative and forecast a further currency deprecation.

Source : Zawya

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