Finance: Fitch’s confirmation of Egypt’s credit rating reflects the robustness and diversification of the economy

Cairo – Direct: Mohamed Maait, the Egyptian Minister of Finance, confirmed that Fitch’s decision to keep the credit rating of Egypt in the local and foreign currencies unchanged at the level of “B +” while also preserving the stable outlook for the Egyptian economy, reflects the renewal of confidence of international institutions, especially rating institutions. Credit in the stability and solidity of the Egyptian economy and its ability to positively deal with the Corona crisis and overcome all external and internal shocks resulting from it.

Fixing the credit rating reflects the effectiveness and balance of economic and financial policies over the past years

“This is due to the Egyptian government continuing to implement financial, economic and monetary reforms that would improve the business environment, ensure the sustainability of public finances and improve the competitiveness of the Egyptian economy,” the minister added in a statement on Friday.

Maait pointed out that the report of the Fitch Foundation made it clear that the continuation of the decision to maintain the credit rating of Egypt was supported by the confidence balance generated due to the economic and financial reforms implemented during the past years, in addition to the diversity and large size of the Egyptian economy, which showed resilience during the global health crisis resulting from the Coronavirus. .

The minister added that the distinguished performance of the Egyptian economy exceeded the economic performance of most of the peer countries during the past year, according to the report of the “Fitch” Foundation, and this is due to the rapid response of the Egyptian government to the needs of the health sector and the efficiency of dealing with the health situation, and controlling infection and death rates from the “pandemic” ».

The minister pointed out that Fitch’s decision to fix the credit rating reflects the effectiveness and balance of the economic and financial policies pursued by the Egyptian government during the past years that have led to good and sustainable growth rates, and the presence of solidity in the Egyptian economy in the face of economic crises, as reflected in the government and state’s dealings. Fast and flexible with the current global health crisis.

Implementing a package of structural reforms to boost growth rates and private sector participation

The minister explained that the government aims to continue the pace of economic and financial reform, implement a package of structural reforms to enhance growth rates and the participation of the private sector in the national economy, strengthen the governance system and follow-up systems for economic performance and improve the business climate.

Fitch expects the Egyptian economy to achieve a growth rate of 3% for the current fiscal year and 6% for the next year

And theThe minister affirmed that Fitch expects the Egyptian economy to achieve a positive growth rate of 3% for the current fiscal year, despite its expectation that the tourism movement will continue to decline and the commercial activity will be limited in light of the continued impact of the global trade movement. Which confirms the diversity of the economic sectors and the solidity of the Egyptian economy.

Fitch also expects that the Egyptian economy will return to achieving high growth rates in the medium term to achieve a real growth rate of 6% in the fiscal year 2021-2022, with the return of tourism activity to Egypt, and the return of commercial activity to normal.

Fitch also expects continued control of inflation rates to achieve an average annual growth rate of 5% in 2021, in addition to the continued increase in the bank sector lending balance for private sector activities to achieve an annual growth rate of 20% during 2021.

The economic impact of the pandemic is less severe than in emerging countries and markets

In turn, Ahmed Kujok, Deputy Minister for Financial Policy, said that the report of the Fitch Foundation clarified the limited impact of the Corona pandemic on the government’s public debt rates as a percentage of GDP, compared to what happened in most emerging countries and even developed countries.

The report also indicated that the government’s public debt rates for Egypt are expected to decline as a percentage of GDP in the medium term starting from the fiscal year 2021-2022. Fitch also expects the public budget deficit to reach 8.5% of GDP during the current fiscal year with the return of Indicators of the budget deficit to decline in the coming years.

A stable outlook reflects the gradual improvement of current account revenues and the sustainability of Egypt’s economic growth in the medium term

Kjok stated that this is in light of the government’s commitment to work to continue the pace of reform while pushing and supporting economic activity and growth rates by financing and approving a package of preventive economic measures to support the sectors most affected by the crisis and the groups most in need, as the total cost of these measures so far is about 2% Of GDP.

He explained that the report of the Fitch Foundation highlighted the government’s efforts to rationalize spending and target work to increase the percentage of revenues to the domestic product during the next four years so that all the targeted development efforts and programs are funded.

The report also emphasized the Egyptian government’s ability to overcome existing and potential challenges thanks to the economic and structural reforms implemented during the past years, as well as the reform plans currently being implemented, which gave the Egyptian economy a great degree of flexibility in the face of such external shocks compared to countries with similar or higher credit ratings.

The report showed that the existence of a broad and strong domestic financing base and a large and reassuring balance of foreign exchange reserves represent elements of strength and support for the Egyptian economy, pointing out that the stable outlook for the Egyptian economy reflects the gradual improvement of current account revenues and the sustainability of Egypt’s economic growth in the medium term.

Kajok pointed out that this report made clear that the most important factors that may lead to raising the credit rating of Egypt in the medium term are the continuation of fiscal consolidation efforts, reducing indebtedness rates for the domestic product and strengthening structural reforms that would improve the business climate and increase the participation of the private sector in the Egyptian economy and the continuation of Achieving real economic growth rates that exceed the institution’s expectations.
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