Standard & Poor’s (S&P) rating for Egypt reflects the efficiency of the country’s economic reform measures, according to Hala El-Said, Minister of Planning and Economic Development.
S&P has maintained the Egyptian economy’s sovereign rating at the “B” level in the long- and short-terms, while maintaining a stable outlook.
This stabilisation was supported by the country’s record in economic and financial reforms, as well as macroeconomic stability. This has led to the accumulation of foreign exchange (FX) reserves and high growth rates in the two years preceding the novel coronavirus (COVID-19) pandemic.
The resilience of the Egyptian economy has also been reflected in the country’s positive growth rates, despite the global pandemic.
In a recent report, the agency added that Egypt’s FX reserves, and access to domestic and foreign debt markets, allow the government to cover high external financing needs and upcoming maturities.
El-Said said that fixing the sovereign classification is important in light of the economic and financial turmoil the world has faced due to the pandemic, with the commensurate structural changes in supply and production chains caused.
“The world is also going through a liquidity crisis that will affect countries’ ability to access financial markets to finance development and sustainable growth,” the minister said.
El-Said added that fixing Egypt’s sovereign rating confirms the merit of the country’s economy, and its ability to emerge from the global crisis and restore high growth rates.
Credit ratings are an important tool that investors use when making decisions to buy bonds and other fixed-income investments. They refer to the minimum return that investors demand on investing in state bonds, which must largely reflect the rating given to the country’s sovereign risk.
The sovereign credit rating carried out by international credit rating agencies, the most important of which is that belonging to S&P, is an assessment of the ability of governments to service their debts within the time frame of the maturity dates specified for these debts. It takes into account the nature of the conditions agreed upon between the government and its lenders when contracting the loan.
Through the use of a set of macro indicators, this evaluation is converted in the form of a specific classification for the state that reflects the sovereign risk for it.
This is, in fact, an assessment of the likelihood that a country will stop servicing its debt. It means that the sovereign credit rating is devoted to the ability, and desire of the state to respect its obligations towards Lenders from various sources.
The country’s credit rating is always accompanied by the so-called Outlook, which reflects the rating agency’s assessment of the rating given to the country in the medium term (between one to three years).