Standard & Poor's credit rating for Egypt stands at B with a stable outlook, but the agency warned of financial challenges facing the country in light of its worsening debt crisis.
In a recent report it published, S&P said that competitive exchange rate, improving macroeconomic fundamentals and rising domestic gas production are all reducing Egypt's external financial imbalances.
The agency pointed out that it will make a positive rating step towards Egypt, if economic growth and check in balance exceeded expectations. Those two gauges, if improved, are said to reduce the country's funding crises and to drop its foreign debt.
Egypt will be looking at a better credit rating if its reform program was able to drop government debt significantly.
The agency reports that Egypt’s economic growth in fiscal year 2018 was 5.3 percent, compared to a 4.2 percent in 2017.
This strong growth is supported by activity in the industrial, gas, tourism and construction sectors, the report said. It noted that the Zohr natural gas field, which began production in December 2017, holds great potential for enabling the country to achieve self-sufficiency.
According to the report, the current spending on infrastructure is expected to increase in the coming years, which will help the construction sector continued development.
But the agency stressed that one of the most significant challenges facing the Egyptian economy is interest rates on government debt, which accounts for 9.9 percent of GDP in fiscal year 2018. The interest margin on government debt to public revenues was likely to rise to 48 percent in 2019, compared to a 45 percent the previous year.
In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Egypt thus having a big impact on the country's borrowing costs.
Monthly inflation rose slightly in October to 2.8 percent from 2.6 percent in September.
The country is experiencing a significant rise in the prices of basic food commodities. Local statistics said that tomato prices rose 28.6 percent in October compared to the previous month, while potatoes increased by 15.7 percent and onions by 16.7 percent.