{"id":577097,"date":"2022-11-09T04:04:16","date_gmt":"2022-11-09T04:04:16","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/11\/09\/fitch-cuts-outlook-on-egypt-to-negative-affirms-b-rating\/"},"modified":"2022-11-09T04:04:16","modified_gmt":"2022-11-09T04:04:16","slug":"fitch-cuts-outlook-on-egypt-to-negative-affirms-b-rating","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/11\/09\/fitch-cuts-outlook-on-egypt-to-negative-affirms-b-rating\/","title":{"rendered":"Fitch cuts outlook on Egypt to negative, affirms B+ rating"},"content":{"rendered":"

<\/a> Fitch Ratings has cut its outlook on Egyptian debt from \u201cstable\u201d to \u201cnegative<\/strong>\u201d<\/strong> due to \u201cdeterioration\u201d in the country\u2019s external liquidity position, it said yesterday<\/a>. The rating agency maintained Egypt\u2019s B+ rating on robust economic growth and \u201cstrong international support\u201d from Gulf allies and multilateral partners but warned that it could downgrade it in the coming months if external funding strains persist or the government fails to cut the deficit and debt as a proportion of GDP.<\/p>\n

Tl;dr:<\/strong> The move \u201creflects the deterioration in Egypt's external liquidity position and reduced prospects for bond market access, leaving the country vulnerable to adverse global conditions at a time of high current account deficits and external debt maturities,\u201d Fitch wrote.<\/p>\n

Fitch isn\u2019t the first of the Big Three rating agencies to make this move:<\/strong> Moody\u2019s also cut its<\/a>outlook to negative<\/a> in May. Meanwhile, S&P Global Ratings maintained a stable outlook<\/a> in its most recent report last month due to the expected influx of IMF and GCC funding.<\/p>\n

Portfolio outflows are the main culprit for the downgrade:<\/strong> Foreign portfolio investment in local debt fell to USD 13 bn as of September, down from more than USD 30 bn in 2021, the rating agency said. Egypt has been hard hit by portfolio outflows triggered by higher financing costs, rising inflation, and the shock caused by the war in Ukraine. This has contributed to foreign reserves falling to USD 33.4 bn<\/a> by October, from USD 40.1 bn<\/a> in February.<\/p>\n

Things could get better, but it will take a while: <\/strong>\u201cSome recovery [in portfolio flows] is likely on recent exchange rate devaluation, policy rate hikes, and agreement on a new 46-month USD 3 bn IMF extended fund facility<\/a>,\u201d Fitch said, while noting that foreign holdings remain a \u201csignificant vulnerability.\u201d So far, markets have shrugged off<\/a> the IMF loan and the central bank\u2019s move toward a floating exchange rate amid continued sell-offs, with analysts expecting market access to remain limited in the near term.<\/p>\n

Also making things difficult:<\/strong><\/p>\n