Egypt’s Minister of Finance Mohamed Maait stated that the government is pursuing more reforms and structural measures in the next period to cope with the economic challenges from both internal and external sources, especially those mentioned in the Standard & Poor’s (S&P) report. The report downgraded Egypt’s sovereign credit rating in both local and foreign currencies from B to B-, with a stable outlook in the long term, and kept the short-term credit rating at B. Maait said in a statement issued by the Ministry of Finance on Saturday that despite the difficulties that the Egyptian economy still faces due to the global inflationary wave caused by geopolitical tensions, Standard & Poor’s changed the future outlook from negative to stable based on the significant structural reforms recently carried out by the Egyptian government, which helped achieve financial discipline.
He explained that the government managed to balance all the current variables and challenges on both the global and domestic levels, including the rise in inflation rates, interest rates, and the depreciation of the local currency against the dollar. An initial surplus of 1.63% of the GDP was achieved compared to an initial surplus of 1.3% of the GDP in the fiscal year 2021/2022, and the total budget deficit reached 6% of the GDP compared to 6.1% during the fiscal year 2021/2022.
The Finance Minister pointed out that tax revenue grew strongly by 27.5% due to efforts in modernizing the tax system, improving tax administration, and combating tax evasion and avoidance. Standard & Poor’s expected financial discipline to continue by implementing measures to modernize the tax system, in addition to the government’s efforts to rationalize spending during the fiscal year 2023/2024, ensuring an initial surplus of 2.5% of the GDP. Maait confirmed that legislative amendments have been enacted to cancel tax and customs exemptions on economic and investment activities for state-owned entities and companies, leading to fair competition in the Egyptian market as part of the state’s efforts to empower the private sector.
He indicated that divestment deals worth $2.5bn were executed within the offering programme during the first quarter of the current fiscal year, helping to increase foreign exchange inflows and provide part of the required foreign financing to cover the needs of the Egyptian economy. Standard & Poor’s also anticipated that the government would continue to implement further reform measures in the upcoming period within the economic reform programme.
Maait added that Standard & Poor’s clarified in its report that it might upgrade Egypt’s sovereign rating if more foreign currency inflows are attracted to the Egyptian economy, considering it as an additional resource that can be achieved by accelerating the offering programme in the upcoming period, enhancing the Egyptian government’s ability to cover its financing and external needs over the next two years, and also contributing to reducing external financing needs and thereby reducing debt servicing costs. This would help increase investors’ and institutions’ confidence in the ability of the Egyptian economy to cope with external challenges. The Finance Minister’s commitment to maintaining financial discipline and boosting tax revenue growth was praised by experts from Standard & Poor’s.
Ahmed Kouchouk, Deputy Minister for Financial Policies and Institutional Development, affirmed that the government is working to enhance the role of the private sector and increase its contributions to economic activity by implementing the necessary structural measures and reforms to improve the business environment, enhance competition, and promote fair competition in the Egyptian market. This would achieve strong and sustainable growth primarily driven by the private sector. He pointed to the concerted efforts of all state authorities to encourage and attract private sector investments, including foreign direct investments, and to boost the export sector and productive activities.
