Standard & Poor's (S&P) Global has affirmed Egypt's "B/B" sovereign credit rating with a stable outlook for the third time since the onset of the COVID-19 pandemic. In its recent report, S&P attributed its decision to Egypt's high foreign exchange reserves and its access to debt markets that both are expected to help cover the country's external financing needs amid the COVID-19 challenge. It also said that the pressure on external and government debt is temporary and it is expected to be mitigated by 2022, supported by projected gross domestic product (GDP) growth and the current account revenues. S&P also expected Egypt to attain a robust medium-term growth, excluding the near-term impacts of the COVID-19 pandemic- owing to the fiscal and economic reforms the government adopts. Moreover, S&P expected Egypt's economy to bounce back as of 2022. On the other hand, the report noted the harsh impacts of the pandemic on Egypt's tourism and remittances, main sources of the country's foreign exchange and revenues, are expected to cause an account deficit of 3.5 percent in the current FY2020/21, which ends in June. It also projected Egypt's external debt to jump to 125 percent of current account revenues in 2021, before contracting to 100 percent in 2023, enhanced by higher global oil prices and the expected improvement of non-oil product exports performance. Yet, the expected incremental global economic recovery would lead to a significant recovery in these sources by 2022, according to the report. On her part, Egypt's Minister of Planning and Economic Development Hala El-Said stated that S&P affirmation came on the back of the stability of Egypt's macro-economy, which led to the increase in the international reserves and the rise in the country's real GDP growth over the past two years. "Egypt's credit rating affirmation is a critical action amid the economic and fiscal disruption that the world has been witnessing since the onset of the pandemic. Such a step asserts Egypt's economy creditworthiness and its ability to come out of the ongoing global crisis and to restore its high real GDP growth," said the minister. Meanwhile, Minister of Finance Mohamed Maait said that S&P decision reflects the international credit ratings' confidence in the Egyptian economy strength and its ability to cope positively and flexibly with the severe impacts of the pandemic. In April, Maait announced that Egypt is working with International Monetary Fund (IMF) to draft a medium-term revenue strategy (MTRS) that aims to mobilise the country's revenues, through which revenues would increase by 2 percent of GDP over four years. The strategy is expected to support Egypt's budget targeted surpluses and to create room for priority spending on health, education and social protection. The IMF is expected to complete its final review of Egypt's IMF-backed Stand-By Arrangement programme in May, which paves the way for Egypt to receive $1.6 billion as a third tranche of its $5.2 billion loan. The IMF approved the loan for Egypt in June 2020, which will be tapped in financing Egypt's structural reform program it announced on Tuesday. Egypt is targeting a 5.4 percent real GDP growth in FY2021/2022 and eying decreasing the budget deficit to GDP ratio to 6.7 percent, according to the FY2021/22 draft budget. FY2021/22 budget is also targeting a 1.5 percent budget initial surplus. FY2021/22 budget revenues are estimated at EGP 1.3 trillion, while expenses are expected to post EGP 1.8 trillion. Moreover, FY2021/22 budget is witnessing an unprecedented increase in public investment allocations, reaching EGP 358.1 billion, with a growth rate of 27.6 percent compared to the allocations of the FY2020/21 budget.
