S&P Global Ratings recently expressed optimism about the financial support pouring into Egypt, citing the $35 billion investment from the UAE to develop the Ras al-Hikma peninsula and an $8 billion IMF deal. The surge in financial backing has triggered several long-awaited reforms in Egypt, including a substantial interest rate hike by the central bank and commitments to currency unshackling and devaluation.
Trevor Cullinan, Director of Sovereign Ratings at S&P Global Ratings in Dubai, acknowledged the anticipated exchange rate adjustments and the IMF’s progression with its existing program. However, the unexpected $35 billion investment from ADQ for the Ras al-Hikma project exceeded expectations.
In October, S&P had downgraded Egypt’s credit rating to B- with a stable outlook, indicating a lack of anticipation for a change in rating direction. The next ratings update for Egypt is scheduled for April 19, and while internal discussions are ongoing post the UAE deal, the rating agency is contemplating potential adjustments.
Cullinan emphasized the significance of the Egyptian authorities’ commitment to reform plans but noted the inherent risk factors. Despite positive statements and dedication to the reform strategy, external events can impact government initiatives. S&P remains watchful and holds the option to convene a committee between scheduled reviews if significant events occur.
On a similar note, Moody’s affirmed its CAA1 rating for Egypt but altered the outlook to positive, citing substantial official and bilateral support. S&P’s cautious stance underscores the importance of monitoring the sustained commitment to reform and potential external influences on Egypt’s financial trajectory.