Fitch Ratings has affirmed Egypt's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B' with a Stable Outlook. The issue ratings on Egypt's senior unsecured foreign- and local-currency bonds are also affirmed at 'B'. The Country Ceiling and the Short-Term Foreign- and Local-Currency IDRs are all affirmed at 'B'. In July the government implemented a second round of electricity subsidy reform by raising prices 35%-40%. According to the latest statement by Fitch, Egypt's ratings balance a large fiscal deficit, a high general government debt/GDP ratio, strains on the balance of payments and recent volatile political history, with low albeit rising external debt and renewed progress in implementing an economic and fiscal reform programme. The government's programme of economic and fiscal reform has regained momentum, after stalling in the fiscal year to June 2016 when the budget deficit widened to a preliminary 12.2% of GDP The government also enacted a second round of fuel subsidy reform (the first round was in mid-2014), raising fuel prices by 30.5%-46.8%. This step was part of the government's programme following the EGP flotation to control the fiscal cost of imported fuel. IMF board approval for the three-year USD12bn extended fund facility followed these reforms, on 11 November with a first tranche of USD2.7bn disbursed immediately. The group expected that GDP growth will be weaker in the financial year 2017, at 3.3%, given the challenges the economy was facing before the EGP flotation, especially in manufacturing and tourism, and because the fiscal and monetary reforms will initially be a drag on private consumption. The group expected a stronger GDP growth in the financial year 2018, at 4.5%, as the exchange rate adjustment beds in, as gas production starts at the giant Zohr field, and with stronger investment.
