Fitch downgrades Egypt’s credit rating to B with a negative outlook

In a recent development, Fitch announced on Friday a downgrade of Egypt’s rating by one notch from B+ to B, along with a negative outlook. This move suggests the possibility of further downgrades in the coming months, citing Egypt’s ongoing economic challenges.

According to a statement from the ratings firm, there has been a rise in external financing risk due to Egypt’s high external financing requirements, limited external financing conditions, and the vulnerability of the country’s overall financing strategy to investor sentiment.

Amidst a backdrop of significant uncertainty surrounding the trajectory of exchange rates and dwindling external liquidity buffers, these challenges only add to the complexity of the current economic climate.

As such, “we see a risk that a further delayed transition to a flexible exchange rate will further undermine confidence, and, potentially, delay the IMF programme,” the statement said.

At the end of April, the rating agency S&P revised the outlook for Egypt’s debt from “stable” to “negative,” due to the “significant external financing needs” it anticipates concerning public finances.

Egypt is going through one of the worst economic crises in its history.

In one year, the Egyptian pound has lost half its value against the US dollar, while the country’s foreign currency reserves have slid.

Cairo secured a loan from the IMF in December, but the US$3 billion that will be paid to it over almost four years can have limited reach: its debt service alone for 2022-2023 amounts to $42 billion.