Global Courant
Inflation remains a major concern for Egyptians and will lead to a sharp rise in borrowing costs, warned Fitch Solutions, one of the Fitch ratings businesses.
Since March 2022, the appreciation of loans has been almost entirely driven by a revaluation of loans after three currency devaluations, Fitch Solutions said in a report.
It expects the pound to lose nearly 20 percent of its value over the rest of 2023 and borrowing to the government to remain high.
In nominal terms, this will lead to credit growth of approximately 20.2 percent at the end of this year.
The report stressed that despite high interest rates and currency depreciation, Egypt’s banking system is strong enough to face economic challenges.
Fitch Solutions expects the non-performing loan rate, which stood at around 3.2 percent, to rise in 2022, as the Central Bank of Egypt last year took a generous stance on non-performing loans in the middle and small businesses and the tourism sector.
Fitch Solutions believes that average adequacy ratios for the first tranche of capital for banks will remain above 17 percent — higher than required standards — and that the Central Bank has begun requiring banks to meet Basel Four standards, which supports the soundness of the banking sector.
The institution raised its expectations for Egypt’s gross domestic product growth for the fiscal year ending June 30 from 3.4 percent to 3.8 percent.
