Fitch downgraded the Issuer Default Ratings (IDRs) and Viability Ratings (VRs) of four major Egyptian banks to “B” from “B+” on May 17th. These include National Bank of Egypt, Banque Misr, Banque Du Caire, and Commercial International Bank, all pivotal to Egypt's banking system. The downgrade follows pressures from the sovereign debt crisis, limited hard currency availability, expected pound depreciation impacting capitalization, and doubts about the government's ability to support banks during crises.
The Egyptian banking sector's net foreign asset deficit reached $24.5 billion in March, indicating heightened vulnerability, compounded by low foreign currency reserves at $32.4 billion. Additionally, $11 billion in treasury bills held by non-residents pose a risk of capital flight. The situation worsens amidst mounting pressure from President Abdel Fattah el-Sisi's allies for economic reforms in exchange for aid.
The regime's reliance on loans (49.2% of the budget) underscores financial fragility, worsened by Egypt being ranked among the highest risk of default nations. Consequently, Egypt faces not just a sovereign debt crisis but also a banking crisis, with potential catastrophic consequences including bank collapse or isolation from international markets, necessitating urgent international intervention. For Complete article visit Fair Observer.
