Dr Maait also declared the following:
Deputy Minister of Finance pointed out:
The Minister of Finance, Dr. Mohammed Maait, assured that “Moody’s” Institution decision to maintain Egypt’s credit rating in both local and foreign currencies as it is at “B2” level, maintaining a stable outlook for the Egyptian economy, reflects the continued confidence of international institutions, especially the credit rating ones, in the Egyptian economy solidity, and its ability to cope positively with the Coronavirus crisis, unlike other counterpart and emerging economies.
Moreover, this decision also reflects Moody’s confidence in the Egyptian economy ability to overcome the internal and external shocks driven by the pandemic, thanks to the solidity and resilience of the frame resistant to shocks, as evident due to the government’s continued implementation of economic, financial, and structural reforms.
Furthermore, the availability of a strong and diversified domestic financing base in Egypt, the high foreign exchange reserve balance, and the government’s continued implementation of the structural economic reform agenda aimed at improving the competitiveness of exports and expanding the revenue base, as the Minister also added.
The Minister noted that Moody’s decision to keep Egypt’s credit rating as it is for the third time respectively during the pandemic represents a continuous consolidation of a confidence generated by the implemented economic and financial reforms during past years. Thus, Egyptian economy was given a great deal of resilience to fund its needs of both local and foreign currencies in spite of Coronavirus outbreak and its negative repercussions on the global economy and region economies.
At the same time which Moody’s kept Egypt’s credit rating as mentioned above, it downgraded and revised down the outlook to negative for 50 % of the MENA region’s countries. This reflects the effectiveness and balance of economic and financial policies adopted by the government during the past years. It is proven by maintaining achievement of a primary surplus in the State General Budget through achieving savings on public expenditures and increasing the public revenues beside exceeding expectations regarding revenues from taxes. As a result, the government debt as apercentage of GDP reached to 90%, as per Moody’s institution.
The Minister pointed out that Moody’s report expected debt to decline as a percentage of GDP to about 84 % by 2024, supported by the continued achievement of primary surpluses and an increase in economic growth to approximately 5.5% starting from FY 2021/2022. This will extend the life of debt to nearly four years, continuous implementation of the debt strategy efficiently in the medium term, as it reduces the financing needs of the State General budget to less than 30 % of GDP, pursuant to the institution’s estimates, reflected in reducing debt service costs.
He affirmed that there is an importance of continued implementation of the structural reform program adopted by the government to improve the business environment through executing various structural reforms. These reforms contribute to increase local and foreign private sector investments in all national development projects, such as infrastructure, education, and health. In addition, improving competitive capacity of the Egyptian products and increasing proceeds of non-petroleum Egyptian exports in order to improve trade balance.
The Deputy Minister for Financial Policies and Institutional Development, Ahmed Kouchouk, stated that government’s commitment to continue accelerating economic reforms, and give momentum to economic activity and growth rates was due to the preventive stimulating procedures’ package that reached to 2% of GDP to support the economic sectors and most favored categories. As a result, the economy was able to score high financial indicators exceeding the last FY estimates by achieving a primary surplus reached to 1.4% of GDP, and decreasing total deficit to about 7.4% of GDP as compared to 8% of GDP for FY 2019/2020. He also noted that the strong performance of public finance was a result of economic performance improvement and rebound amid the precautionary procedures against Coronavirus. In addition, reform procedures aimed at enlarging tax base and disseminate the automation procedures to improve and simplify the offered services for taxpayers and reducing tax evasion.
Mr. Kouchouk mentioned that the reforms made, and policies adopted helped to gradually decrease the debt service bill because of making the debt life extended and the interest rates for the governmental securities stabilized. Therefore, Moody’s expected that the adopted policies and continued reforms will help allocating high percentage of spending for health, education, and social protection programs.
Mr. Kouchouk indicated that Moody’s experts praised the government’s continued efforts to target reducing the public budget deficit during the fiscal year 2021/2022 to 6.7 % of GDP, while continuing to achieve a primary surplus of about 1.5 % of the GDP. The report presented the key procedures taken by the government to maintain the financial objectives, such as re-rationalizing spending, increasing allocations for health and education sectors, along with “Takaful and Karama”, beside cash transfers for the most-needy groups and supporting export. In addition, the procedures adopted by the government to widen tax base.
The report also confirmed expectations from Moody’s experts that the Egyptian economy will resume its high growth rates of about 5.5 % during the FY 2021/2022, compared to what was expected during the last FY at 2.8 % considering a positive and high expected contribution from several sectors, such as the technology and communications sector, health and government services, wholesale and retail, and agriculture
It is expected that the sectors such as tourism, aviation, transformational industries, building and construction will positively contribute to gradual easing of the restrictions imposed on travel and world trade movement.