Moody's finds it unlikely for Egypt to meet expected revenue from Suez Canal expansion

Thursday 13-08-2015 12:51 PM
Moody's finds it unlikely for Egypt to meet expected revenue from Suez Canal expansion

CAIRO, Aug 13 (Aswat Masriya) - Credit ratings provider Moody's expects "only limited credit-positive effects" for Egypt in the current fiscal year, in light of the expansion of the Suez Canal, it said on Thursday.

Moody's stressed in a statement that the expansion's support to Egypt's credit quality will be through increased current account receipts and government revenues.

Egypt inaugurated a project dubbed by the government as the "New Suez Canal" last week.

It involves digging a 35 –kilometres-long canal parallel to the current Suez Canal, to minimise the amount of time ships spend crossing the canal. Additionally, the Suez Canal was made deeper and wider to admit larger ships.

The Suez Canal Authority says the deepening of the canal and drilling a parallel junction to it would double the Suez Canal revenues from $5.3 billion to $13.3 billion in 2023.

The authority expects around 97 ships to daily cross the canal after the expansion by 2023, while the number of ships daily crossing the canal before the project was launched was nearly 49 ships.

"The degree of support [for Egypt's credit quality] will depend on an acceleration in global trade growth, which seems unlikely to materialise quickly," the statement read.

A graph in the statement expects that with the historical average growth, Suez Canal revenues will register at just below $5.6 billion in 2023. For revenues to reach the projected $13.3 billion, Moody's said Egypt would need a 10 percent increase in world trade growth.

Moody's said it expects Egypt's external current account balance to post a deficit of nearly 3 percent of the gross domestic product in the current fiscal year.

It nevertheless referred to the domestic financing of the "New Suez Canal" project, saying it will "shield" net international reserves.

The Egyptian government collected from citizens $8.17 billion (64 billion Egyptian pounds) within 8 working days last September to fund the project, by issuing five-year investment certificates at an interest rate of 12 percent.

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