Economy Egypt’s outlook revised up as external financial risks ease By Pramod Kumar May 6, 2024, 4:23 AM Reuters/Amr Abdallah Dalsh A shopping street in Cairo. The Ras El-Hekma investment underscores the strength of GCC financial support for Egypt, said Fitch Fitch Ratings has upgraded Egypt’s outlook to “positive” from “stable” citing lower external financing risks and increased foreign capital inflow. The $35 billion Ras El-Hekma deal with the UAE, a flexible exchange rate, and tightening of monetary policy have reduced near-term external financing risks, the global rating agency said in a report. “The Ras El-Hekma investment underscores the strength of GCC financial support for Egypt,” it added. You might also like:Economic indicators from every GCC country Fitch anticipates that the exchange rate flexibility will be more sustainable than before, with gross forex reserves projected to increase by over $16 billion in fiscal year (FY) 2024 to $50 billion, despite the current account deficit widening to 5.2 percent of GDP. In March, the International Monetary Fund augmented the extended fund facility to $8 billion, while the European Union approved a three-year support package of $8 billion. Non-resident holdings of domestic debt rose to $35.3 billion from $16.6 billion at the end of 2023. Andrew Cunningham: Egypt must deal with its fundamental challenges ‘Worst is behind us’ in Egypt’s black market dollar war says BMI Scott Livermore: Egypt and Turkey turn a corner but Lebanon flounders As a result of capital inflows, the net foreign liability of the Central Bank of Egypt fell to $1.3 billion, and that of banks to $2.8 billion from $17.5 billion in January. Fitch forecasts the general government deficit to narrow 0.3 percentage points in 2024 to 5.5 percent of GDP, with fiscal revenues from the Ras El-Hekma deal more than offsetting a 2.7 percent of GDP rise in debt interest. However, further escalation of regional conflict poses a risk to tourism and Suez Canal receipts, which are projected to decline by 6 percent and 19 percent, respectively, in 2024.