Ratings agency Standard & Poor s on Thursday maintained Egypt s long-term sovereign credit ratings at BB+ for foreign currency and BBB- for local currency. It said it could raise the ratings if the government meets its target to reduce the fiscal deficit, cuts public debt and maintains the momentum of structural reform. But the ratings could come under pressure if the government fails to deliver on these objectives, it added. Economic growth has picked up and external finances have remained robust, supported by the non-trade balance of the current account and strong capital inflows. Nevertheless, government finances remain a key challenge in the medium term, S&P credit analyst Farouk Soussa said in a statement. Fiscal consolidation is required to bring the general government deficit down from levels currently in excess of 8 percent of GDP (gross domestic product). Although the government has introduced a range of measures designed to reduce the deficit by 1 percent of GDP per year, it will eventually have to address its subsidy policy and the bloated bureaucracy, which together consumed almost 80 percent of its revenues in 2005-2006, he added. The government has started to reduce subsidies, notably by raising the price of petrol and other fuels by up to 30 percent in July. Subsidies on fuel would otherwise have accounted for about one fifth of all government spending. The agency also maintained its short-term ratings at B for foreign currency and A-3 for local currency. It described the outlook for Egypt as stable, based on the balance between progress achieved on reform and the challenges that remain on the fiscal side.
