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Fitch Downgrades Egypt’s Credit Rating to ‘B-’, Citing Growing Debt and Delayed Reforms

November 5, 2023
Image Credit: Exclusivo Egipto

Credit rating agency Fitch announced its decision to downgrade Egypt’s long-term foreign-currency issuer default rating (IDR) from ‘B’ to ‘B-‘, citing a growing concern over heightened financial risks and an increase in government debt, in a report on 3 November.

An IDR is akin to a report card for a country’s ability to pay back money borrowed from other countries or organizations. It indicates how capable or incapable the country is at managing finances and repaying debts.

“The downgrade reflects increased risks to Egypt’s external financing, macroeconomic stability and the trajectory of already-high government debt,” the report read.

Fitch also cited increasing reliance on imports, slow progress on reforms, and delays in the program review with the International Monetary Fund (IMF).

Fitch’s decision comes after fellow credit rating agencies Moody’s and Standard & Poor’s (S&P) also downgraded Egypt’s credit ratings on 7 October and 20 October respectively.

Despite the downgrade, the agency also reversed Egypt’s economic outlook from ‘negative’ to ‘stable’.

In explaining its rationale behind the revised outlook, the agency highlighted that the presidential elections in December, reforms, slowdown of megaprojects, and an anticipated exchange rate adjustment will accelerate and likely lead to further financing from the IMF program.

Fitch added that it expects an increased inflow from tourism, the Suez Canal and a recovery of remittances in the coming months to help sustain import costs.

Egypt has been facing a severe economic crisis due to longstanding structural imbalances and external economic shocks, first triggered by the Covid-19 pandemic, then the Ukraine War, and most recently the war on Gaza.

This domino effect of global crises resulted in soaring inflation rates and an increasing reliance on debt including to service existing debt.

As a result, Egypt continues to face challenges in repaying its growing debt bill and has devalued its currency several times in response to these pressures.

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