Egypt’s outlook raised by Fitch after $57bn global bailout
TLDR
- Egypt's credit rating outlook upgraded from stable to positive by Fitch Ratings after securing $57 billion international bailout
- Despite maintaining B- rating, optimism grows on Egypt's economic prospects following investment commitments
- Currency devaluation part of strategy to address foreign exchange shortages and enhance economic stability
Fitch Ratings has upgraded Egypt’s credit rating outlook from stable to positive following the North African nation's securing of an international bailout totaling $57 billion to address its cash-strapped economy.
Despite affirming Egypt’s B- rating, which remains six notches below investment grade, the outlook revision reflects growing optimism about the country's economic prospects. This decision comes shortly after Egyptian authorities finalized a $35 billion agreement with the United Arab Emirates, along with additional support from the IMF, the World Bank, and Britain.
These substantial investment commitments, coupled with a significant interest-rate hike, have enabled Egypt to allow its currency to devalue. This move is part of the country's broader strategy to address one of its most severe foreign exchange shortages in decades and bolster economic stability.
Key Takeaways
Authorities in Egypt have been grappling with the repercussions of years of managing the currency, compounded by an outflow of foreign investment in the local debt market following Russia's invasion of Ukraine. Additional challenges, such as the Israel-Gaza conflict and attacks on Red Sea shipping by Houthi militants in Yemen, have further strained the economy. To address these economic pressures, authorities are undertaking various reform efforts. These include plans to sell more than 30 state-owned companies and assets, with progress being made gradually. Furthermore, reforms aim to control spending and foster private-sector growth, including reducing the involvement of the powerful military in the economy.
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