Cairo-Mubasher: Fitch has affirmed Egypt's long-term foreign and local currency issuer default ratings (IDR) at 'B', with a Stable Outlook.
The issue ratings on the state's senior unsecured foreign and local currency bonds have also been affirmed at 'B'.
The country ceiling has been affirmed at 'B', and the short-term foreign currency IDR at 'B'.
Egypt's ratings balance a high fiscal deficit and debt/GDP ratio, low foreign reserves coverage of imports and recent volatile political history, with low external debt and progress in implementing a wide-ranging economic reform programme, the agency said.
Front-loaded fiscal consolidation cut the deficit excluding grants to a preliminary 12.5% of GDP in FY15 (to end-June) from 17.6% of GDP in FY14.
Further deficit reduction is anticipated in FY16, with various new measures implemented and restraint in public sector pay awards. However, the introduction of VAT, the largest single revenue-raising measure, has been delayed.
Fitch expects fiscal consolidation throughout the forecast period, but with savings partially offset by higher social spending and spending commitments in the new constitution the deficit is forecast to remain high.
Moderate deficit reduction and stronger nominal GDP growth are forecast to put the debt/GDP ratio on a downward trend, ending a multi-year deterioration.
Nonetheless, debt/GDP is around double the peer median, at an estimated 93.7% at end FY15 and is only expected to fall by around five percentage points by end-FY17. Domestic banks, including the Central Bank, account for the bulk of deficit financing.
