Minister of Finance Mohamed Maait has affirmed that the decision of Standard & Poor’s to keep Egypt’s credit rating in both local and foreign currencies unchanged at the “B” level, while also maintaining the outlook for the Egyptian economy at “stable” for the second time in three months, is considered a new international certificate of confidence that the Egyptian economy is recovering from the repercussions of the exceptional global and local economic conditions of the past year.
The consequences of the war in Europe were intertwined with the negative effects of the Coronavirus pandemic, however, Egypt succeeded in dealing with these global conditions with balanced and integrated decisions and reforms that reflect coordination between the government and the Central Bank to ensure the economic stability of the country, Maait added.
He added that this decision is also evidence that the future of Egypt’s economy is stable, in light of commitment to the pace of economic reform supported by the International Monetary Fund in an agreement that extends to 48 months, which allows for prospects for economic growth in the coming years, and enhances the ability to obtain sufficient financing to meet the country’s external needs, stressing that we are implementing a national economic reform programme to ensure the stability of economic conditions, maintain financial discipline, and increase the competitiveness of the Egyptian economy.
Maait added that Standard & Poor’s highlighted, in its latest report published last Thursday, its expectation that financial discipline will continue to be achieved during the current fiscal year, in order to complement what was achieved in the past years, including the fiscal year 2021/2022, when the total deficit reached 6.1% of the total GDP, down from 6.8% in the year 2020/2021, and achieving a primary surplus for the fifth year in a row amounting to 1.3% of GDP, in the fiscal year 2021/2022, pointing to the strong growth in government revenues due to the expansion of the tax base thanks to large-scale mechanization measures that are applied to improve tax administration.
He pointed out that the report praised the government’s efforts to rationalize expenditures and expand the social protection network and programs adopted by the Ministry of Finance, to mitigate the effects of the global crisis. Standard & Poor’s expects that over the next three years, the economic growth rate will average about 4% annually, driven by the strong growth of the construction and energy sectors, along with the continued strong growth of sectors such as information and communication technology, wholesale and retail trade, manufacturing industries, agriculture, and health.
Maait explained that the report indicates expectations of a decline and decrease in the value of the current account deficit in nominal terms during the coming period until 2026, in light of the support through the flexibility of the exchange rate regime in use and its positive impact on increasing the competitiveness and the proceeds of Egyptian commodity and service exports, in addition to the strong performance of the sectors’ revenues, including tourism and petroleum exports, especially natural gas, whose monthly revenues have recently reached about $700m a month.
The Standard & Poor’s report also indicated a significant improvement in the indicators of the current balance for the fiscal year 2021/2022, as the proceeds of non-oil exports achieved a remarkable increase, recording 29% annually, in light of the increase in exports of fertilizers, medicines and ready-made clothes, and a large surplus was achieved on the side of the petroleum trade balance $4.4bn, in light of the expansion of natural gas exports.
According to Maait, the report also praised the Suez Canal’s achievement of revenues that are considered the highest historically, amounting to $7bn, and it is expected to reach $8bn during the year 2023, pointing to the significant increase in revenues of the tourism sector during the past year, in light of the recovery of the sector, which achieved revenues It amounted to $10.7bn, with the diversification of tourism sources to witness strong flows from various markets, such as the Gulf countries, Germany and Poland, and an increase in the proceeds of foreign direct investment by 71%, to achieve about $9.1bn compared to about $5.2bn in the previous year, in addition to the diversity of sources foreign investments flowing to many sectors, the most important of which are: manufacturing industries, construction and building, communications and information technology.
Ahmed Kouchouk, Deputy Minister of Finance for Fiscal Policies and Institutional Reform, said that Standard & Poor’s reports received positively the state ownership policy document, which reflects the desire of the state and its institutions to encourage and attract the private sector to increase its investments in the Egyptian market and enhance its contribution to the economic growth in the coming period.
He added that the country aims to attract foreign direct investments annually by about $10bn over the coming years, while continuing to push efforts to develop the proceeds of commodity exports to reach $100bn, and increase the revenue of the tourism sector to $30bn annually, pointing out that these ambitious goals can be achieved in In light of the huge investment opportunities in the Egyptian economy.
He noted that Standard & Poor’s report indicated the possibility of improving Egypt’s credit rating during the coming period if the economic expansion in Egypt is high and strong, and if the national economic reform program applied during the coming period is able to attract more external flows and achieve a noticeable decrease in government debt levels as a percentage of GDP, in addition to the ability to obtain sustainable external financing in light of the current difficult international economic conditions during the coming period.