Egypt was downgraded by Fitch Ratings for the first time in a decade after a series of currency devaluations and lack of significant reforms sent the North African nation’s economy reeling.
(Bloomberg) — Egypt was downgraded by Fitch Ratings for the first time in a decade after a series of currency devaluations and lack of significant reforms sent the North African nation’s economy reeling.
The sovereign credit rating was cut one level to B from B+, five levels into non-investment-grade level, according to a statement Friday. Fitch’s rating for Egypt is now on par with S&P Global ratings. Fitch’s outlook for Egypt remains negative.
Egypt’s high external financing requirements combined with constraints in obtaining that financing contributed to the downgrade, Fitch analysts including Laure de Nervo said in a statement.
It 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.
Egypt has devalued the pound three times since March 2022, and analysts expect another move this year. Authorities have been working to clear an import backlog that built up because of the shortage of foreign currency. That helped fuel a surge in prices and pushed the inflation rate up to 32.7% in March.
The International Monetary Fund this month said the Middle East’s most populous country is “serious” about applying a flexible foreign exchange rate regime as it works to restore investor confidence.
Read: IMF Awaits More Egyptian Reforms Before First Review
The Washington-based fund’s first review of Egypt’s program, expected in March, has yet to take place. That delay, along with the wait for investment pledges from Gulf nations to be enacted, has deepened worries in the country grappling with its worst foreign-currency crunch and highest inflation rate in years.
“We see a risk that a further delayed transition to a flexible exchange rate will further undermine confidence, and, potentially, delay the IMF programme,” Fitch said.
The IMF said it is waiting to see Egypt enact more of the wide-ranging reforms it pledged before carrying out the first review of a $3 billion rescue program, Bloomberg reported last month.
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