Merrill Lynch proves confidence in Egyptian Economy
Egypt, Economics, 7/11/2000

In the first official comment on a report recently issued by Standard and Poor's (S&P) on the Egyptian economy, Youssef Boutros Ghali said that an outlook downgrade by the rating agency was no surprise to the government.

While keeping its rating of the Egyptian economy at the level of BBB- in terms of investments, S&P said in a report recently, that it cut its outlook on Egypt to negative from stable and warned of a possible downgrade in credit ratings if no corrective action is taken.

"We are aware of the repercussions that occurred in some aspects and slowdowns in others, so the S&P analysis was no surprise," Ghali said in remarks published by the press.

"We have already implemented some procedures, foremost of which are repaying the government debts to create flexibility in the economic policy," he added, noting that the government has reached conclusions similar to those of S&P, promoting corrective policies that started in March.

The report was based on visits made in February and March without taking into consideration later actions as moves to repay the government debts, which the minister said would lead to an improvement in the economy.

Meanwhile, Merrill Lynch noted that the Egyptian government has taken numerous steps to bring the economy back on track and subsequently managed to restore confidence in the reform program despite the financial and monetary crisis that hit the economy since 1997 up till the first quarter of 1999.

Egypt's financial policy has witnessed remarkable improvement as a result of the current drive by the government to reduce budget deficit such as laying down a ceiling on investments spending, paying back the arrears and stepping up privatization, according to a report issued by the International Rating institution.

Merrill Lynch also expressed support for Egypt's plans to issue dollar bonds in the international markets.

The world stock exchanges would welcome the move, thanks to the good performance of the Egyptian economy and the slash of the country's external debts, according to the report.

"The government, furthermore, aims to bring down the budget deficit to two per cent of the GDP by the year 2001-2002," it added.

The report said "Despite the continued reduction in the foreign currency reserve, this cutdown, however, started to recede by the second half of 1999. The deficit in the capital balance was slashed from $ 650 million to $ 94 million by the second half of last year, a move that can help keep the exchange rate close to its current level within the coming months," an Egyptian statement stated.

"In spite of the three main problems which faced the Egyptian economy since 1997 up to the first quarter of 1999,namely the financial and monetary crisis which struck the emerging markets in addition to the decline of oil price and the impact of the Luxor incident of 1997, the report stressed on the good performance of the economy mirroring the good base of the economic reforms adopted since the early 90s," Ghali said.

It also called on the Egyptian government to adopt further positive steps, including more transparency and accelerated privatization, to achieve a growth rate of seven percent.

Ghali denied any contradiction between the S&P report and that of Merrill Lynch, saying that the latter has surveyed the market in a more recent period of time.

"Merill Lynch is investing in the market and thus is keen on getting the latest data on the economic policies," according to Ghali.

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