Egypt reduces debt by 20% in last 3 years despite COVID-19

Daily News Egypt
5 Min Read

Egypt’s Minister of Finance Mohamed Maait has confirmed that Egypt has reduced its debt by 20% over the last three years, despite the novel coronavirus (COVID-19) pandemic.

He pointed out that Egypt’s gross domestic product (GDP) in the current fiscal year (FY) 2020/21 is expected to reach EGP 6.4trn.

This comes as a result of the expansion of development investments that reflect the country’s success and helps achieve a balance between preserving the health of citizens and strengthening the national economy.

Maait added that the continued praise from international financing and rating institutions is helping to attract new investments, and provides more job opportunities for young people.

It also leads to the localisation of advanced global industries and modern technologies; raising production capabilities; expanding the export base; and enhancing the competitiveness of Egyptian products in global markets.

The minister noted that the international rating institutions Moody’s, Fitch, and Standard & Poor’s (S&P) have all decided to maintain Egypt’s credit rating with a stable outlook amid the pandemic.

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), called the Egyptian economy’s performance “a successful model in economic reform”.

The IMF had raised its estimates for the Egyptian economy’s growth rate for the FY 2021/22, to record 5.7%.

Egypt is expected to record 5.8% GDP growth in FY 2025/26, with a decrease in the inflation rate during FY 2020/21 to 4.8% compared to 5.7% in FY 2019/20.

S&P predicted that government and private investments will contribute to achieving sustainable growth rates of about 5.3% in the medium term, during the period 2022-2024. It has maintained Egypt’s credit rating three consecutive times since the start of the pandemic.

Capital Intelligence has recently maintained Egypt’s B+credit rating with a stable outlook.

Fitch also expects the Egyptian economy to grow by about 6% during the next fiscal year (FY) 2021/22. It has praised Egypt’s draft public budget for the new fiscal year, which adopts widely credible goals which strengthen the government’s fiscal and economic reform agenda, and reduces debts in the medium term.

Meanwhile, the “African Economic Outlook 2021” report also predicts that Egypt will restore growth rates to the pre-coronavirus level of 4.9% in 2022.

Maait said that Goldman Sachs, one of the largest financial institutions in the world, described Egypt as one of the few countries that succeeded in controlling inflation rates.

This comes despite the upward trend of major inflation rates continuing in most countries worldwide since the beginning of 2021.

The minister emphasised that Egypt’s measures to control spending during the past few years has had a great impact on achieving financial savings. This helped avoid economic contraction and pushed the completion of the policy of structural reforms.

It has also helped control inflation and unemployment rates, whilst ensuring foreign exchange (FX) reserves in the banking sector amounted to about $40.3bn by the end of last April.

Maait said that Egypt joined the watch list on the JP Morgan index for emerging market government bonds. Egypt is expected to secure a spot on JP Morgan’s emerging-market government bonds index in the second half of 2021,

It also seeks to adjust the “yield curve”, whilst raising the participation rate of foreign investors in government financial instruments with an increasing volume of each issue.

He added that, in its latest report issued in February, Morgan Stanley placed Egyptian debts within the best credit rating group for developing countries in debt.

This was according to the positive results of the criteria to measure the level of risk in debt repayment. The ranking highlights the state’s ability to control debts and access debt markets.

Share This Article