Cairo, Egypt (CNN) – Morgan Stanley modified its view of Egyptian debt from “neutral” to “not favorable” due to the increase in the size of credit risks in the near term, attributing the reason for this to the continued burden of credit rating risks and the possibility of a rise in interest rates in the United States. For a longer period of time, Egypt will remain outside the global capital markets, in addition to concerns about implementing the economic reforms agreed upon with the International Monetary Fund, according to what was reported by local media.
Economists believe that the Egyptian government is trying to confront the debt crisis by increasing the volume of foreign direct investments and signing currency swap agreements. They stressed their confidence in Egypt’s ability to fulfill its international pledges, calling for the necessity of rescheduling short-term debt.
According to data from the Central Bank of Egypt, Egypt is obligated to repay $29.2 billion in foreign debt and debt installments during the next year.
Aya Zuhair, head of the research department at Zilla Capital, said that the Morgan Stanley report is consistent with what major international rating institutions reported about the possibility of a new cut in Egypt’s credit rating due to non-implementation of some provisions of the economic reform program agreed upon with the International Monetary Fund, most notably the implementation of a flexible policy. The exchange rate of the pound against the dollar to eliminate the parallel market and accelerate the pace of the government proposals program, especially with the approaching presidential elections, which indicates the difficulty of implementing these reforms at the present time.
Nominations for the Egyptian presidential elections open on October 5, provided that they are held outside the country in the first 3 days of December, and within Egypt during the 10, 11, and 12 days of the same month.
Zuhair added, in exclusive statements to CNN Arabic, that Egypt must fulfill its international obligations during the coming period, accelerate the implementation of the government proposals program, and adopt a plan to eliminate the parallel market for the dollar to increase remittances from Egyptians abroad, while negotiating to schedule short-term debts, and obtaining support. Gulf to postpone debt maturities, pointing to the impact of the repercussions of the crisis of high interest rates in the United States on Egypt, which increases the pressure on attracting indirect foreign investments.
The Egyptian government previously announced a list of 32 government companies operating in various economic activities that it intends to sell to strategic investors or list on the stock exchange. Three more were added later, and it has already carried out the sale of shares in more than 7 companies from this list.
Economist Dr. Mustafa Badra believes that the negative view of some international institutions’ reports regarding the economic situation and Egypt’s ability to commit to repaying its debts “is an exaggeration,” indicating that most reports “attribute the reasons for this view to external factors that negatively affect the Egyptian economy, such as the rise in… Interest rates globally, especially in the United States of America, which keeps Egypt outside the global capital markets.”
The Central Bank of Egypt increased interest rates 6 times during the period from March 2022 to August 2023, with a total of 1,100 basis points, divided between 800 basis points during the year 2022 and 300 basis points in the March and August meetings of the current year.
Badra added, in exclusive statements to CNN Arabic, that Egypt “suffers, like other emerging countries, from the burden of rising interest rates globally, which has caused pressure on its local currencies.” However, he pointed out that the economic crisis in Egypt “is not the result of external factors only, but rather There are some internal policies that also caused the crisis, and the state is currently trying to fix them.”
Since March of last year, Egypt has been suffering from an economic crisis, the impact of which is evident in a severe shortage of foreign exchange as a result of the exit of indirect foreign investments, an increase in the import bill due to the repercussions of the Ukrainian war, and a rise in global interest rates.
Mustafa Badra downplayed concerns about Egypt’s commitment to pay more than $29 billion in debt and interest installments over the next year, adding that the same concerns appeared before the beginning of this year, but the Central Bank of Egypt succeeded in paying all international obligations, in addition to trying to reschedule part of the debts. Relying more on foreign direct investment to achieve sustainable economic growth and provide more job opportunities, indicating that Egypt has never defaulted in its international obligations throughout its history.
Egypt paid $52 billion in debt and debt installments during the past two fiscal years, including $25.5 billion during the first six months of this year, according to press statements by Finance Minister Mohamed Maait.
The economic expert pointed out that Egypt’s joining the BRICS group may contribute to alleviating the impact of the dollar crisis. Because it will allow Egypt to exchange local currency with the member states of the group, who are among the largest trading partners, and it also contributes to increasing foreign direct investments, stressing the need to coincide with the scheduling of short-term loans to reduce the demand for foreign exchange locally.
It is noteworthy that Egypt will join BRICS next January, in addition to the countries of Saudi Arabia, the Emirates, Iran, Ethiopia and Argentina.
2023-10-03 22:24:47
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