Reported recently was the following story on Egypt's currency rating and reflects how this economy is likely to be grabbing more news headlines. The big reduction in government debt, and the likely economic growth around last years rate of 7.1%, adds to the positive story that Egypt is increasingly viewed as a key economy and one that will attract increasing amounts of foreign investment as domestic economic activity drives the demand for goods and services.
"Egypt’s long- and short-term foreign currency ratings have been raised to BBB-/A3. At the same time the agency has affirmed Egypt’s local currency ratings of BBB/A3.
The statement from Capital Intelligence pointed out that the change in the foreign currency rating reflects the substantial improvement in external solvency and liquidity ratios over the past few years, which indicate strong repayment capacity and an increased resilience to external shocks. CI’s expects that balance of payments trends will remain consistent with external sustainability over the medium term. Egypt’s ratings are also supported by the good progress being made on fiscal and structural reforms, which have helped to improve economic and financial fundamentals.
The statement commended the fact that the external current account recorded its sixth consecutive surplus in fiscal year 2006/2007, which ended in June, net foreign direct investment exceeded USD11billion, while official foreign exchange reserves reached USD 27.4 billion. Gross external debt continued to decline and is estimated by CI to have fallen to a comparatively low 23% of GDP or 60% of current account receipts (CARs). External vulnerability is mitigated by the country’s net creditor position, with the foreign assets of the central bank and commercial banking sector estimated by CI to exceed the external debt stock by the equivalent of 47% of CARs or 18% of GDP in June. Public external debt service is low and official reserves (excluding gold) are currently about seven times as high as the stock of short-term public external debt on a remaining maturity basis (up from four times in June 2004).
Good progress is being made in implementing the government’s economic reform program adopted in 2004. The foreign exchange market has been liberalized; customs duties reduced and trade procedures simplified; corporate and personal income taxes reformed; and tax revenue administration strengthened. The privatization process has gathered momentum: more than 40 enterprises or joint ventures were wholly or partly privatized during the past two fiscal years, the two largest of which were the Bank of Alexandria and Egypt Telecom. Efforts are also being made to strengthen macroeconomic policy frameworks and improve governance.
The statement added that improving macroeconomic management and more assertive structural reforms have contributed to acceleration in economic growth and increased employment. Real GDP increased by 6.8% in 2005/06 and by 7.1% in 2006/07 and is expected to remain above trend in the current year. The upturn in the economy and drawdown of government deposits to retire debt has led to a substantial reduction in the ratio of government debt to GDP from 103.3% in June 2005 to an estimated 78.6% in June 2007. Moody's Investors Service, one of the world’s most respected and widely utilized sources for credit ratings, also, praised positive developments in the Egyptian economy since 2004. Moody’s report said that this growth was driven by several factors including higher oil price, growth of tourism and increased exports. The past year witnessed a remarkable growth in different sectors, including sectors not related to the energy filed, which implies more jobs and more flexibility in adapting to external variables. The report expected the overall deficit of the public government to decrease in the coming years. The surplus in the balance of payments and economic growth are expected to remain the same.
Egypt's rating of susceptibility to external fluctuations went down from 42.7%to 26.6 percent in 2006 and is expected to reach 21.1 % in 2008. This reflects the economy's increased capability of absorbing external shocks especially with the huge increase of financial inflows and net international reserves.
Source: Ministry of Investment"
No comments:
Post a Comment