Fitch Ratings has maintained its sovereign rating on Egypt at B even as some of its competitors start getting more bearish on the Arab world’s most populous nation amid foreign exchange shortages, a high fiscal deficit and little evidence the government is keen to reform its economy.
A B puts Egypt firmly in junk territory and is the lowest rating Fitch has given to a Middle East country, along with Lebanon.
This month, S&P Global Ratings cut Egypt’s credit outlook to negative, citing lower inflows of hard currency into the country from sources including aid from the Arabian Gulf and tourism.
Fitch said that is was keeping its outlook on Egypt stable, rather than cutting it.
Meanwhile, the agency kept Egypt’s long-term foreign and local currency issuer default ratings at B. The issue ratings on Egypt’s senior unsecured foreign- and local-currency bonds were also unchanged at B, it said.
“Egypt’s ratings balance a high fiscal deficit and general government debt-GDP ratio, low foreign reserve coverage of imports and recent volatile political history, with low external debt and gradual progress in implementing an economic and fiscal reform programme,” Fitch said to explain its decision.
The agency said that while the political situation had stabilised in Egypt following the upheavals from 2011-13, political tensions remained and attacks on security forces were likely to continue.
Egypt’s economy grew by 4.2 per cent in the fiscal year that ended on June 30 last year, said the ratings agency, following an annual growth rate of 2 per cent since the protests that ousted Hosni Mubarak as president in 2011.
That rate of growth is expected to have slowed to 3.2 per cent in the fiscal year that ends next month amid declines in tourism and shortages of hard currency.
The Egyptian central bank devalued the Egyptian pound by 13 per cent in March but that failed to kill the trade of US dollars in the black market. The US dollar trades at a premium of about 20 per cent in the black market from the official rate of 8.85.
mkassem@thenational.ae
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