Fitch Ratings has lowered credit ratings on four Egyptian banks, citing concerns about external financing, macroeconomic stability, and government debt
Fitch Ratings has lowered credit ratings on four Egyptian banks, citing concerns about external financing, macroeconomic stability, and government debt.
The rating agency revised its long-term issuer default rating for state-owned National Bank of Egypt, Banque Misr, and Banque Du Caire, as well as Commercial International Bank (CIB), to B- with a stable outlook from B with a negative outlook.
Fitch downgraded Egypt’s banking operating environment score to b- with a stable outlook from b with a negative outlook, which it states is in line with the country’s rating, considering its “tight external liquidity, high core inflation” and weakening business conditions in the non-oil sector.
“Economic conditions for Egyptian banks should remain weak given high inflation, rising input costs, geopolitical uncertainties, and lingering pressures on the currency. The banking sector recorded a high net foreign liability position of $16.4 billion at end-3Q23, reflecting tight [foreign currency] liquidity,” the report said.
To improve the country’s foreign currency reserves, the Egyptian government has expanded efforts to curb international transactions and attract foreign investors, sovereign and private.
Its privatization program looks to bring in $5 billion by the end of the current fiscal year, while the country is gearing up to collect around EGP 70 billion (approx. $2.264 billion) from its IPO program alone.
Egypt’s international reserves saw a slight upward trend in October, climbing to $35.1 billion as it works to bring in fresh FX and diversify its external financing sources. The Ministry of Finance recently issued new Samurai and Panda bonds to meet its goal of attracting $25 billion in foreign direct investments (FDIs) within the next 5 years.
Fitch sees real GDP growth slowing to 3.5% in the financial year ending June 2024 and 4.5% in FY2024/2025 compared with 3.8% in FY2021/2022, with inflation averaging 33% in FY24 and views a further currency adjustment as highly likely.
