In a move that enhances confidence in the Egyptian economy, Standard & Poor’s (S&P) Global has affirmed Egypt’s B sovereign credit rating with a stable outlook for the fourth consecutive time since the outbreak of the pandemic.
This offers an additional testimony from the international credit rating of the resilience of the Egyptian economy, Finance Minister Mohamed Maeet said.
It comes at a time when the Egyptian economy has achieved a real growth rate of about 3.3 per cent during the fiscal year 2020-2021, one of the highest growth rates in the region, despite the negative repercussions of the pandemic, Maeet stressed.
In a recent report, S&P praised the strength, flexibility, and balance of the economic reform programme set by the Egyptian government to counter the negative repercussions of the coronavirus pandemic.
Egypt’s economic, financial and structural reforms have helped provide a robust and diversified domestic financing base, as well as achieving a high foreign exchange reserve balance, in a way that improves the competitiveness of exports, the rating agency stated.
It also expects Egypt to attain a robust medium-term growth, excluding the near-term impacts of the Covid-19 pandemic, owing to the fiscal and economic reforms the government adopts.
The Egyptian economy is set to achieve strong growth rates over the medium term, hitting about 5.5 per cent during the fiscal year 2023/2024, boosted by the recovery of tourism sector, especially with the return of Russian, English and Italian flights to the Red Sea, according to S&P report.
Maeet said that economic and financial reforms, the government has launched over the past few years, have contributed to consolidating confidence among foreign investors and international institutions and helped reduce unemployment and inflation rates.
Standard & Poor’s expects the total deficit of the public budget to decline to 6.8 per cent during the current fiscal year, due to the development and digitisation of tax system nationwide, the minister said.
This, in turn, will lead to a decline in the ratio of public debt to about 86 per cent of gross domestic product (GDP) by June 2022, supported by achieving a primary surplus close to 1.5 per cent of GDP during the current fiscal year.
S&P expects that when Egypt joins JP Morgan’s GBI index for emerging markets by the end of January 2022, about $4.4 billion will be pumped in new investments into the government’s debt instruments, including treasury bills and bonds.
The inclusion will make Egypt the second country in the Middle East and Africa to join the index, besides South Africa, according to JP Morgan in recent report.
Maeet said that S&P decision reflects the international credit ratings’ confidence in the Egyptian economy strength and its ability to cope positively and flexibly with the severe impacts of the pandemic.
Egypt is targeting a 5.4 per cent real GDP growth in FY2021/2022 and eying decreasing the budget deficit to GDP ratio to 6.8 per cent, according to the FY2021/22 draft budget.
The S&P report said that the impact of the coronavirus crisis on the Egyptian economy is limited compared to emerging economies worldwide.
“We succeeded in managing the budget, reducing the total deficit to 7.4 per cent of GDP, and recording a primary surplus of 1.45 per cent during the last fiscal year,” the minister said.
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