The Egyptian economy is resilient and able to meet its external financial needs, despite the challenges posed by geopolitical tensions and rising interest rates, according to Finance Minister Mohamed Maait. He made this statement on Saturday in response to Fitch’s decision to downgrade Egypt’s credit rating from “B” to “-B” with a stable outlook.
Maait said that Egypt has secured sources of external financing until the end of the current fiscal year, estimated at $4bn, by diversifying its international markets. He cited the successful issuance of samurai bonds in Japan and sustainable bonds in China, worth $500m each, as examples of Egypt’s access to favourable terms from multilateral development banks. He also said that Egypt has repaid $52bn of its external obligations over the past two years, despite the global economic difficulties.
The minister highlighted the strong performance of the public finances, which achieved a primary surplus of 1.6% of GDP in 2022/2023, up from 1.3% in 2021/2022, and reduced the total budget deficit to 6% of GDP, down from 6.1% in the previous year. He added that the government is implementing structural reforms to enhance economic growth, empower the private sector, create more jobs, and improve the living standards and services for the citizens.
Maait also pointed out the positive indicators of the Egyptian economy, such as the inflows of foreign direct investment, which reached $10bn in the last fiscal year and are expected to rise to $12bn this year, the revenues of the Suez Canal, which amounted to $10bn in the last fiscal year and are targeted to increase to $12bn this year, and the ability to overcome the regional crisis. He said that these factors reflect the confidence of the international institutions in the economic path adopted by the Egyptian government, which aims to deal with successive global crises through more effective financial policies.
The Egyptian government is committed to improving the public debt indicators to GDP by increasing state revenues, enhancing expenditure efficiency, and controlling financial performance, Maait asserted. He said that the government has successfully developed the tax administration by using technological solutions and digital systems, which resulted in a 27.2% increase in tax revenues in the last fiscal year and a 34% increase in the first quarter of this year.
Maait also stressed that the government prioritizes social protection and structural reforms to cope with the internal and external challenges that affect the Egyptian economy. He said that the budget allocations for social protection and support in the current fiscal year amounted to 530 billion pounds, with a 20% annual growth rate.
Ahmed Kouchouk, Deputy Minister for Financial Policies and Institutional Development, said that the government is continuing the economic and structural reforms to deal with the global crises, as Fitch’s report indicated. He said that the government is creating a business-friendly environment for private sector investments in development projects, based on advanced infrastructure.
He also mentioned that the government has successfully exited several economic activities worth $2.5bn under the offerings program in the first quarter of the current fiscal year, which helped increase the foreign exchange inflows to cover the needs of the Egyptian economy. Fitch’s report highlighted the increased risks of external financing for Egypt, due to the rising cost of financing and interest rates, the depreciation of the pound against the dollar, the timing of external debt repayment, and the increase in government debt indicators.