Ratings Agencies Fitch and Standard & Poor’s Reports on Gaza Conflict and Red Sea Attacks Impact on Egypt and Neighboring Countries

2024-01-27 12:14:18

Ratings agencies Fitch and Standard & Poor’s warned in two separate reports on Friday (January 26, 2024) that the broader repercussions of the conflict in Gaza increase the risks faced by neighboring countries, as well as the effects of the Red Sea attacks. on certain countries in the region, notably Egypt.

Fitch said the long-term war in Gaza and the spread of the conflict to neighboring regions increase the risks faced by countries in the region, particularly Egypt. She added that the intervention of the Yemeni Houthi movement also highlighted the possibility that the repercussions of the conflict in Gaza might develop “in a way that is difficult to predict.”

Fitch noted that foreign partners may be willing to increase their support for Egypt in response to the fallout associated with the conflict, and that its International Monetary Fund program may be expanded. While emphasizing that she does not expect Jordan’s energy, water and food supplies to be significantly affected by the situation in the Red Sea, she noted that she expects that that Jordan’s external financial position and external balances remain consistent with its recent credit rating.

As for the rating agency Standard & Poor’s Global, it explained the same day that the impact on Suez Canal traffic due to attacks on ships in the Red Sea is exacerbating the currency shortage in Egypt.

The agency said in a report that traffic fees through the Suez Canal contribute regarding 8 percent of Egyptian government revenue and provide a large share of the country’s foreign exchange earnings.

Standard & Poor’s Global expects the foreign currency liquidity conditions of Egyptian banks to continue to deteriorate, noting that the scarcity of foreign exchange in the Egyptian economy is placing additional pressures on the financing capabilities of Egyptian banks.

It also expects Egyptian authorities to once once more reduce the value of the local currency from 31 Egyptian pounds to the dollar to a level more in line with the parallel market price, which the agency says is currently around 60 Egyptian pounds to the dollar.

However, the agency said it notes that tighter monetary controls, which are unlikely to be eased following exchange rate devaluation, have led to a sharp increase in public debt service on foreign currency debt. locally in recent months.

A government official recently said that Egypt had requested an extension of the International Monetary Fund’s loan program for another two years to receive the final payment in September 2028, coinciding with its request to increase the value of the financing from three billion to seven billion dollars.

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