Press Release
Moody’s upgrades Egypt’s credit rating Minister of Finance:Financial and economic stability is an essential component of restoring confidence in the Egyptian economy
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• Financial and economic reforms and protection and social justice are necessary to realize the required economic takeoff.
• Moody’s statement:The expected economic growth in current FY is 4.5%.
• High growth rates, financial and economic stability, the government’s commitment to implement reforms are the main reasons to upgrade the credit rating.
Minister of Finance, Hany Kadry Dimian, declared that Moody’s decision of upgrading Egypt’s credit rating confirms that the government moves with steady and sound steps to achieve the economic and social goals in order to realize a real progress in people’s standards of living.
He cleared that Moody’s statement, primarily, focusing on the main economic fundamentals improved driving the economic growth, the importance of reforms implemented by the government to achieve financial and economic stability, economy’s resilience, affirms that the Egyptian economy’s power depends on internal fundamentals, adoption of the appropriate economic policies, mobilization of the economy’s potential capabilities, achieving the best utilization of the state’s human and natural resources, in addition to the important role of friendly countries to international support the Egyptian economy and the available opportunities for domestic and foreign investors that are clearly shown during the recent Egypt Economic Development Conference, EEDC, in Sharm El Sheikh.
The Minister confirmed that there is an imperative need to complete the financial and economic reforms, focusing on policies and programs of protection and social equity to realize the required economic takeoff, the legitimate citizens’ aspirations reflect the economic growth in their daily standard of living as soon as possible.
Moody’s announced that Egypt’s credit rating has been upgraded one notch for long-term foreign and domestic borrowing, to reach B3, while the future outlook of Egyptian economy still at “stable”. Such progress is considered the first since the beginning of Egypt’s credit rating by Moody’s in 1997, especially after downgrading the rating 5 consecutive times since 2011.
Moody’s decision depends on the increased economic growth rates, and its expectations concerning the continuous achievement of financial and economic stability on medium-term, whereas it expects that GDP rate increases in this FY to the ratio of 4.5%, and within the coming 4 years it will range between 5-6%, taking into consideration the continuous political stability, the improved investment environment, increasing investment rates.
It mentioned that cash reserves in CBE are stable at the level of 15.5 billion American dollar at the end of February 2015; providing a large coverage for the external debt within the current fiscal year. It clarified that expectations of increase domestic and foreign investments are based on the results of Egypt Economic Development Conference, EEDC, in Sharm El Sheikh, and the Gulf’s announced aid. In addition to the announcement of signing direct foreign investments at the value of 38 billion American dollar; reducing the risks faced by balance of payments.
Moody’s praised the government’s commitment to implement the financial reforms, also it expects that the government will complete the financial and economic reforms to control over- public spending, increase the state’s resources, e.g. apply the VAT instead of sales tax; resulting that such reforms shall gradually reduce the general budget deficit. Moody’s estimated that budget deficit has reduced to the ratio of 10% of GDP in the current fiscal year, and the public debt to less than 90% of GDP.
It cleared that the factors of upgrading the Egyptian economy’s credit rating are represented in implementation of the reforms which lead to reduce budget deficit and public debt rates as soon as possible, achievement of quick and sustainable economic growth rates, rapid reduction of inflation rates, increment of foreign reserve levels with less reliance on foreign aids, in addition to continuous improvement of security situation.
Moody’s explained that the factors of reducing future ratings are represented in any retreat may happen in the security or the political stability, deterioration in balance of payments, or non-completion of financial and economic reform program; that would increase the government’s borrowing cost.
(Ministry Of Finance)
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