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Tuesday, 8 September 2020

Egypt’s credit rating is vulnerable to water risks -Fitch

Egypt’s sovereign credit rating is “particularly” exposed to water stress and drought risks, Fitch Ratings suggests. This comes as water security could soon weigh more in ratings decisions, Fitch’s Mahmoud Harb and Kathleen Chen said in a recent research note. “Water risks are likely to become a more important sovereign rating driver over the medium to long term, particularly in the event of severe climate change,” said the analysts. Egypt’s sovereign rating could be impacted, as the country got a score of “3” on “water resources and management.” Fitch assigns an environmental, social and corporate governance (ESG) score for multiple environmental factors on a scale of 1-5, based on the level of their impact on their credit rating.

Everyone in our neighborhood faces similar challenges: Fitch notes that Israel, Jordan, Kuwait, Morocco, Saudi Arabia and Tunisia are particularly exposed to drought and water stress risks.

Fitch isn’t the only ratings agency sounding the alarm on our water risk. Moody’s recently listed long-term water challenges (from a growing population and exacerbated by the filling of the Grand Ethiopian Renaissance Dam) as factors that could lead to a downgrade of our sovereign credit rating. To mitigate risks of water stress, authorities recently said they’re investing some EGP 134.2 bn through 2050 to build seawater desalination plants that would give us 6.4 mn cbm/d of potable water.

You can catch the full Fitch report (paywall) on the impact of water on sovereign ratings here.

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