PHOTO
LONDON - S&P Global Ratings says it has been encouraged by the rush of financial support Egypt has seen in the last two weeks, including a $35 billion UAE investment to develop the Ras al-Hikma peninsula on its Mediterranean coast and an $8 billion IMF deal.
Since securing the deal with the Emirati sovereign fund ADQ two weeks ago, the North African country has launched some long-sought reforms: The central bank this week delivered a 600 basis-point interest rate hike and pledged to unshackle its currency alongside a devaluation, while the government secured an enhanced deal with the International Monetary Fund.
"We had an expectation that the exchange rate adjustment was imminent and that the IMF would move forward with its existing programme, and potentially expand that," said Trevor Cullinan, director, sovereign ratings at S&P Global Ratings in Dubai.
"What we were not expecting was the whole Ras al-Hikma inflow from ADQ, which is obviously a really big number."
Back in October, S&P had downgraded Egypt's credit rating to B- with a stable outlook - a status usually indicating that a change in direction of travel for its rating was not on the cards.
S&P's next ratings update on Egypt is scheduled for April 19, though Cullinan said internal discussions were ongoing following the UAE deal. S&P could also change the rating itself without a prior outlook change, he added, declining to say whether that would be the case for Egypt.
"If there are significant events in between the scheduled reviews as you know that take place twice per year, then we do have the option to call a committee potentially... So that is an option that we have."
Moody's on Thursday affirmed its CAA1 rating but changed its outlook on Egypt to positive citing significant official and bilateral support.
S&P's Cullinan identified the authorities' commitment to the reform plans as a risk factor.
"The Egyptian authorities are making really positive statements. Taken on face value they seem committed to this whole reform strategy, but as we know events can derail a government and we will wait and see."
(Reporting by Karin Strohecker and Marc Jones, Editing by Hugh Lawson)