Fitch Ratings has downgraded Egypt's long-term foreign-currency credit rating to "B" from "B+" for its debt issuances, while maintaining its negative outlook. The credit rating agency attributed the downgrade to its negative expectations, including increased external financing risks due to higher financing requirements and restricted terms, as well as the sensitivity of Egypt's broader financing plan to investor sentiment, according to a statement released early Saturday morning.

This move by Fitch Ratings comes amid growing concerns about Egypt's ability to service its external debt, given the country's reliance on external financing to meet its debt obligations. Egypt's external debt surged to $123.5 billion in the third quarter of fiscal year 2021, up from $111.3 billion in the same period a year earlier.

In Fitch's view, external financing risk has increased given high external financing requirements, constrained external financing conditions and the sensitivity of Egypt's broader financing plan to investor sentiment. All this comes against a background of high uncertainty on the exchange-rate trajectory, and reduced external liquidity buffers.

“We see a risk that a further delayed transition to a flexible exchange rate will further undermine confidence, and, potentially, delay the IMF program,” Fitch said. “The rating action also captures a marked deterioration of public debt metrics, including a renewed deterioration in government interest costs/revenue, which, if not reversed, would put medium-term debt sustainability at risk.”

The downgrade by Fitch Ratings is a blow to Egypt's efforts to attract foreign investment and maintain its position as a key emerging market. Egypt's economy has been struggling to recover from the impact of the COVID-19 pandemic, which has caused a decline in tourism revenue, a drop in remittances, and a fall in exports.

Despite the challenges, Egypt has been taking steps to address its economic difficulties, including implementing structural reforms and launching major infrastructure projects.

The government has also secured external financing from international lenders, including the International Monetary Fund, the World Bank, and the African Development Bank, to support its reform program and ease its financing needs.

Despite the recent credit rating downgrade by Fitch, there have been positive developments in Egypt's economy. The country has shown resilience amidst the global pandemic, with a growth rate of 3.6% in the first quarter of 2021. Additionally, Egypt has implemented economic reforms, including the liberalization of the exchange rate, which have helped to reduce the budget deficit and increase foreign investment.

Furthermore, Egypt has made significant strides in developing its infrastructure, particularly in the energy sector. The country has launched several major projects, including the construction of the world's largest solar park in the Benban complex, which will generate 1.8 GW of clean energy upon completion.

Overall, while the credit rating downgrade is a setback for Egypt, the country's economy has demonstrated resilience and promising growth prospects. With continued reforms and investment in infrastructure, Egypt has the potential to attract even more foreign investment and boost its economic prospects in the years ahead.