Egypt's Minister of Finance Mohamed Maait has said that Moody's decision to maintain Egypt's credit rating reflects the continued confidence of international institutions, especially credit rating institutions, in the solidity of the Egyptian economy. Moody's has decided to fix Egypt's credit rating in both local and foreign currencies as is without modification at the "B2" level, while maintaining the "stable outlook" for the domestic economy. The decision also reflects Egypt's ability to deal positively and flexibly with the novel coronavirus (COVID-19) crisis, in contrast to peer and emerging economies. In a statement on Saturday, Maait added that the decision also reflects Moody's confidence in the Egyptian economy's ability to overcome external and internal shocks resulting from the pandemic. This is due to the strength and flexibility of the shock resistance framework, which was evident through the government's continued implementation of economic, financial, and structural reforms. It also reflects: the availability of a strong and diversified domestic financing base in Egypt; a high foreign exchange reserve balance; and the government's continued implementation of the structural economic reform agenda. The latter aims to improve the competitiveness of exports and expanding the revenue base. Maait said that Moody's decision to maintain Egypt's credit rating for the third consecutive time during the pandemic period represents a continuous consolidation of the confidence generated. It has been positively impacted by the economic and financial reforms implemented during the past few years. These have given the Egyptian economy sufficient flexibility to finance its needs in both local and foreign currencies despite the pandemic. The minister said that the decision to fix Egypt's credit rating was made at a time when Moody's downgraded the credit rating or made a negative adjustment to the future outlook of more than 50% of countries in Africa and the Middle East. The decision to do so reflects the effectiveness and balance of the economic and financial policies adopted by the government during the past years. He pointed out that the Moody's report expected a decrease in debt as a percentage of GDP to about 84% of GDP by 2024. This is supported by the continuation of achieving primary surpluses and an increase in economic growth to approximately 5.5%, starting from fiscal year (FY) 2021/22, and extending the life of the debt to nearly four years. This is in addition to the continued efficient implementation of the debt strategy in the medium-term, which contributes to reducing the financing needs of the public budget to less than 30% of GDP. Ahmed Kouchouk, Deputy Minister for Financial Policies and Institutional Development, said that the government is committed to continue accelerating the pace of economic reform and boost the rates of economic activity and growth. This is the result of the package of preventive stimulus measures, which amounted to 2% of GDP to support the economic sectors and the most favoured groups. It was reflected in the economy's ability to achieve strong financial indicators that exceeded estimates for the last FY, by achieving a primary surplus of 1.4% of GDP. It also reduced the total deficit to about 7.4% of GDP, compared to 8% of GDP in FY 2019/2020. Kouchouk added that the strong performance of public finances was the result of the improvement and recovery of economic performance in light of the precautionary measures taken against COVID-19. It was also impacted by the reform measures aimed at expanding the tax base, and generalising mechanisation procedures to improve and simplify the services provided to financiers and reduce tax evasion. He said that the adopted reforms and policies contributed to achieving a gradual reduction in the debt service bill as a result of its longevity and stability of interest rates on government securities. The report also confirmed the expectations of Moody's experts that the Egyptian economy would resume achieving strong growth rates at about 5.5% during FY 2021/22. This was compared to expectations during the last FY, at a rate of 2.8%, as several sectors contribute more. These include the technology and communications sector, health and government services, wholesale, retail and agriculture. It is expected that the contribution of tourism, aviation, manufacturing, and the building and construction sectors will also contribute positively.
