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Egypt minister blames Fitch downgrade on external forces

Baby, Person, Body Part Reuters/Amr Abdallah Dalsh
Remittances from Egyptians working abroad are down by 26.1%

Egypt’s finance minister has said Fitch Ratings’ decision to downgrade its sovereign credit rating is down to the country’s struggle against extreme external pressures.

The ratings agency reduced Egypt’s long-term foreign-currency rating to B, from B+, while maintaining its negative outlook.

Mohamed Maait, Cairo’s finance minister, attributed the decision to the difficulties faced by emerging countries, including Egypt, in obtaining external funds, Ahram Online reported. 

The challenges include the Russia-Ukraine war, global inflation, surging interest rates and funding costs, Maait said.

The minister also pointed to restrictive policies adopted by central banks worldwide, resulting in capital flowing from emerging markets to developed states.

These conditions have also created difficulties for emerging economies to access global markets and caused uncertainty among investors, Maait said.

Fitch Ratings said its downgrade was founded on high external financing requirements, constrained external financing conditions and sensitivity of the broader financing plan to investor sentiment.

The agency warned, however, that “any delay in transitioning to a flexible exchange rate will further undermine confidence and potentially delay the International Monetary Fund programme”.

The IMF chief responsible for the Middle East and Central Asia, Jihad Azour, called on Egypt to liberalise its exchange rate amid stasis in Cairo over the reforms demanded by the international community, AGBI reported last week.

Egypt’s extended fund facility programme with the IMF allows the country to receive a loan of $3 billion through the fiscal year 2025/26.

Earlier, S&P Global Ratings revised its outlook on Egypt from stable to negative.