Egypt’s Finance Minister Mohamed Maait has affirmed the country’s economic resilience, asserting its capability to meet external financial requirements. Despite the challenges posed by geopolitical tensions and rising interest rates, Egypt holds a stable outlook. This declaration comes in response to Fitch‘s recent decision to downgrade Egypt’s credit rating from “B” to “B-“.
Diversifying financing sources
Maait emphasized Egypt’s success in securing external financing sources of $4 billion until the end of the current fiscal year. The country issued samurai bonds in Japan and sustainable bonds in China, both valued at $500 million. These efforts have demonstrated Egypt’s access to favorable terms from multilateral development banks. Despite global economic challenges, Egypt has managed to repay $52 billion of its external obligations over the past two years.
In addition, the minister of finance highlighted Egypt’s robust financial performance, revealing a 1.6 percent increase in GDP for the fiscal year 2022/2023. That is a 0.3 percent increase from 1.3 percent in the previous fiscal year. Furthermore, Egypt has reduced the total budget deficit to 6 percent of its GDP down from 6.1 percent last year. Maait emphasized that the government is actively implementing structural reforms to enhance economic growth and foster the private sector. Egypt aims to generate more job opportunities and elevate its citizens living standards and services.
Positive economic indicators
The minister of finance pointed out several positive indicators of the Egyptian economy. That includes significant foreign direct investment inflows, which reached $10 billion in the previous fiscal year. Furthermore, foreign direct investments are projected to rise to $12 billion this year. Suez Canal revenues also reached $10 billion last year, with an expected target of $12 billion this year. He attributed these achievements to the international institutions’ confidence in the economic path pursued by the Egyptian government. This path focuses on effective financial policies to address global crises.
Additionally, Maait reaffirmed the government’s commitment to enhancing public debt indicators to GDP. Increasing state revenues, improving expenditure efficiency, and maintaining control over financial performance are some of the measures being looked into.
Also, Maait highlighted the improvement of the tax administration through technological solutions and digital systems. That led to a 27.2 percent increase in tax revenues last year. Moreover, a 34 percent increase in revenues was recorded in the first quarter of this year only.
Social protection and structural reforms
At the top of the Egyptian government’s priorities are social protection and structural reforms. That is with the aim of addressing both internal and external economic challenges. Budget allocations for social protection and support reached 530 billion pounds this year, reflecting a 20 percent annual growth rate.
Read: Central Bank of Egypt holds interest rates steady, unveils revised GDP growth forecasts
Creating a business-friendly environment and mitigating risks
The Egyptian government is committed to economic and structural reforms that align with Fitch’s report. The government is actively fostering a business-friendly environment to encourage private sector investments in development projects. Thus, the government aims to focus on advancing its infrastructure.
The government has been successful in exiting several economic activities worth $2.5 billion during the first quarter of this year. This move contributed to increased foreign exchange inflows, which have been vital in covering the needs of the Egyptian economy. Fitch’s report pointed out the increased risks in external financing due to various factors. Factors include the rising cost of financing and interest rates and the depreciation of the pound against the dollar. The timing of external debt repayment and the increase in government debt indicators are also factors that increase that risk. However, the report acknowledges Egypt’s proactive measures and resilience in navigating the challenging economic landscape.
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