Fitch downgrades Egypt one notch deeper into junk territory

Fitch downgrades Egypt one notch deeper into junk territory

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Ratings agency Fitch downgraded Egypt’s long-term foreign-currency issuer default rating (IDR) to ‘B-‘ from ‘B’, citing increased financial risks and higher government debt.

The downgrade reflects increased risks to Egypt’s external financing, macroeconomic stability and the trajectory of already-high government debt, the rating agency said.

Recovery in Egypt’s key tourism industry, which had been hammered by the pandemic, has been offset by last year’s surge in energy prices and ongoing rise in global borrowing costs.

This has added to the country’s external loans, which quadrupled to over $160 billion in the seven years to 2022.

Economists say that the country has spent much of the borrowed cash on projects that will not quickly generate the foreign currency it needs.

The country’s debt problems have come amid a bruising economic crisis that has triggered a string of currency devaluations and record inflation.

Egypt’s economic woes

The rating agency said it expects Egypt to face a significant rise in external debt maturities in fiscal years ending June 2024 and June 2025, from that which ended in June 2023.

The North African country is one of the world’s biggest wheat importers and also relies on imports of other basic foods and fuel.

The rating agency expects receipts