Egypt reaps the effects of economic reforms

Fitch Ratings has amended its outlook for Egypt which is expected to enhance the inflow of foreign direct investment and resolve the currency crisis, writes Ahmad Abdel Rahman.

Finance and economics experts confirmed that the decision of Fitch Ratings, an international credit rating agency to amend its outlook for Egypt is a testimony of confidence in the Egyptian economy and will enhance foreign direct investment flows into Egypt.

In its latest report, Fitch modified its outlook for Egypt from stable to positive.

Commenting on the amendment, Sahar El-Damaty, professor of economics at the American University in Cairo (AUC), said in a special statement to the official Middle East News Agency (MENA) that the amendment of Egypt's outlook by Fitch is a strong step that will enhance the flow of foreign investments into the country. El-Damaty explained that the consensus that occurred with the International Monetary Fund (IMF), Egypt's adoption of a flexible exchange rate, and the rise in interest rates to curb inflation, led to changing the outlook to positive.

El-Damaty added that reducing the state's public investment spending and setting a ceiling for it at about EGP1 trillion (USD21 billion) during the next fiscal year would help attract more investments that are private. El-Damaty expected that other global credit rating institutions would follow the same trend after the strong reforms taking place in Egypt.

Egypt recently agreed with the IMF to raise the value of the expected loan to about USD8 billion, to contribute to bridging its financing gap. This is in addition to the funds flowing from the Ras El Hekma project in cooperation with the United Arab Emirates (UAE), amounting to about USD35 billion. There is also USD8 billion coming from the European Union.

Ahmed Amin, professor of finance and investment at the Sadat Academy for Administrative Sciences, agreed with El-Damaty's opinion that economic reforms underpinned Fitch's decision. Amin pointed out that this step is supported by government efforts to attract billions of dollars to resolve the currency crisis. These efforts have stabilised the exchange rate and eliminated the black market.

Amin added that Egypt's recent success in reaching an agreement with the IMF is considered a testimony of confidence in the Egyptian economy's ability to recover and a message to international rating institutions to change their view of Egypt's economy.

Amin also stressed that amending the outlook represents an important step to enhancing the flow of foreign direct investment. (FDI).It will also encourage foreign direct investment. (FDI). Amin also said that the decisions taken recently by the government in cooperation with the Central Bank of Egypt (CBE) contributed significantly to changing the view of many international institutions towards Egypt and the expectation of further improvement in the economic situation.

Ahmed Shawky, a banking expert, said that the fact that Fitch's view has become more positive, sends a strong message to the world that Egypt does not have any problems in paying its obligations, whether in the short or medium term. He also adds that this change also contributes to attracting FDI to Egypt.

Shawky also pointed out that the Ras Al-Hekma investment deal had a significant positive impact on the growth of the Egyptian economy, noting that all of this reflects the steps taken by the government to support the overall economy.

Last March, Standard & Poor's also revised its outlook for the Egyptian economy to positive, following on from Moody's announcement that it had revised its outlook on Egypt's rating to positive.