Egypt’s economic troubles result in a Fitch downgrade

Warnings of further downgrades
Egypt’s economic troubles result in a Fitch downgrade
Egypt's credit rating downgraded by Fitch

Egypt’s credit rating has been lowered by Fitch from B+ to B, and a negative outlook has been added. This suggests that there may be further downgrades in the near future owing to the country’s economic difficulties, according to the credit rating agency.

Fitch stated in a statement that the nation’s external financing risk has risen due to high external financing demands, limited external funding options, and the vulnerability of Egypt’s overall funding strategy to investor sentiments.

Read more: Fitch downgrades Egypt’s outlook to negative, affirms B+

The statement expresses concern about the uncertain exchange-rate trajectory and reduced external liquidity buffers, which are occurring concurrently. The delay in transitioning to a flexible exchange rate could undermine confidence and potentially postpone the International Monetary Fund (IMF) program, according to the statement.

In late April, S&P altered Egypt’s debt outlook from “stable” to “negative” due to expected substantial external financing demands for public finances.

Egypt is currently facing a severe economic crisis, which is arguably one of the worst in its history. Over the course of a year, the value of the Egyptian pound has plummeted by 50% against the US dollar, and the nation’s foreign currency reserves have also declined. Although Cairo secured a loan from the IMF in December, the $3 billion it will receive over nearly four years may have limited impact, as its debt service for 2022-2023 alone is a staggering $42 billion.

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