Fitch Ratings slashed Egypt’s debt rating on Friday to ‘B’ from ‘B+’, the first downgrade in a decade after a series of currency devaluations and lack of significant reforms sent the North African nation’s economy reeling.
The rating agency’s outlook for Egypt remains negative. Fitch’s downgrade for Egypt is now on par with S&P Global ratings.
Fitch analysts said Egypt’s external financing risk has increased given the country’s high external financing requirements, constrained external financing conditions and the sensitivity of its broader financing plan to investor sentiment.
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”.
Further delays in the transition to a flexible exchange rate are expected to significantly undermine confidence and potentially, delay the International Monetary Fund (IMF) programme.
Earlier this month, the IMF said Egypt’s most populous country is “serious” about applying a flexible foreign exchange rate regime as it works to restore investor confidence.
The delays in the fund’s first review of Egypt’s program, which was expected in March, together with long-awaited investment pledges from friendly nations have deepened worries in the Arab world’s most populous nation as it grapples with its worst foreign-currency crunch and highest inflation rate in years.
Fitch estimates that Egypt’s external financing requirement is more challenging in FY2024 due to increasing government external debt maturities of around $7.2 billion, up from $4.3 billion in FY2023.
