Egypt Credit Rating Raised by Fitch on Subsidies, Oil Savings

Egypt’s debt was upgraded by Fitch Ratings, which praised the government’s efforts to reduce budget deficits and said the recent slump in commodity prices will generate further savings.

The long-term foreign-currency debt rating was increased to B, five steps below investment grade, from B-, Fitch said in a statement today. Egypt is rated one level below that by Standard & Poor’s, and two levels lower by Moody’s Investors Service.

President Abdel-Fattah El-Sisi, the ex-soldier who toppled an elected Islamist leader last year, announced cuts in subsidies when he took office after winning elections in May. The country posted a budget deficit of 12.6 percent of gross domestic product last fiscal year and subsidies, much of them for energy, account for about a quarter of spending.

The subsidy cuts and tax increases are “part of a clear five-year fiscal consolidation strategy,” Fitch said. “Power shortages are being tackled, overdue payments to oil companies reduced, investment laws revised and disputes with foreign investors settled. The measures appear to have strong political backing.”

Fitch predicted that the deficit will narrow to 10.2 percent of GDP in the fiscal year that ends in June, and the burden will start to shrink. It said economic growth will accelerate to 4.7 percent by 2016, more than double last year’s pace.

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