Fitch upgrades Egypt credit rating to B, cites subsidy cuts

Ahram Online , Saturday 20 Dec 2014

Fitch Ratings logo (Photo: Reuters)

Fitch Ratings upgraded Egypt's credit rating one step to "B" from "B-" citing structural reforms the government has undertaken including reducing fuel subsidies.

"Fuel subsidy cuts and tax hikes have been implemented as part of a clear five-year fiscal consolidation strategy," The agency said in statement late Friday.

"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."

On 30 January 2013, when ousted president Mohamed Morsi was still in power, the agency cut Egypt's sovereign rating from "B+" to "B".

Shortly after Morsi's ouster on 3 July 2013 following nationwide mass protests against his rule, Fitch further downgraded Egypt's credit rating to "B-", citing political turmoil.

Over the past months, Egypt's government has introduced a series of reforms to revive an economy suffering from weak growth, high inflation and rising unemployment.

In July, it cut energy subsidies raising prices by up to 78 percent in a bid to reduce the budget deficit to 11 percent of GDP, down from 12.8 percent last year.

Fitch said Egypt's Outlooks are stable, meaning that upside and downside risks to the rating are balanced.

Factors that could lead to negative rating action include disruption of aid from Egypt's oil rich Arab allies and militant attacks that “undermine economic activity.”

Following the ouster of Islamist president Mohamed Morsi in July 2013, oil-rich Gulf states pledged billions in support of the new regime.

Egypt has received more than $11 billion in cash and oil products to date.

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