Today, Tuesday, the “Fitch” credit rating agency modified its future view of Egypt to “negative” after it was “stable”, and attributed this to the deterioration of the country’s external liquidity situation, and the decline in its ability to access bond markets, and announced in a statement fixing Egypt’s credit rating at “B+”. (B+).
The agency said – in its report – that the main rating drivers reflect weak liquidity and financing risks, and low possibilities of accessing the bond market, and indicated that this makes the country vulnerable to adverse global conditions, at a time of high current account and external deficits.
And “Fitch” stated that the reserves of the Central Bank of Egypt decreased to less than 32 billion dollars by October 2022, from 35 billion dollars in March and 40 billion dollars in February of the same year, although they were stable in the last months. Finally, the agency stated that the reserve coverage is weaker than the average and 4 months is sufficient.
The central bank’s non-reserve foreign currency assets, most of which are deposits in local banks, recovered to $2 billion by last October, from $1.5 billion in March.
According to the report, the assets of the Central Bank of Egypt are still far below their level in February 2022, amounting to $ 9 billion.
As for the inflows of foreign portfolios, the report indicated that the decrease in liquidity was driven by the outflows of non-residents’ investments in government debt issued locally.
The credit rating agency’s report indicated that foreign investments in Egyptian debt instruments fell to about $13 billion by September 2022, from $17 billion in March, and more than $30 billion in 2021.
Fitch expected some recovery in foreign inflows due to the recent exchange rate devaluation, interest rate hikes, and the agreement on the new $3 billion IMF extended loan facility for 46 months.
Despite maintaining reassuring foreign exchange reserves, Egypt is facing a crisis of fluctuation in foreign exchange, which prompted the government and the central bank to take measures to reduce the exit of the dollar.