Egypt’s expectations improve in the short term, but long term still doubtful: Fitch

Ahram Online, Wednesday 29 Jun 2011

Uncertainty of Egypt's political outcome and its implications for economic policy prompt a cautious stance by the ratings agency

The international ratings agency Fitch Inc has removed the “negative rating watch” from Egypt’s long-term foreign currency issuer as well as its long-term local currency IDRs (International Depository Receipt). Both ratings, however, still have a negative outlook.

The negative rating watch indicated there is a heightened likelihood of a rating downgrade in the short term. A negative outlook means the rating is likely to move downwards over a one to two-year period.

“The affirmation and negative outlook signifies that although negative rating pressure on Egypt has eased in the short term, political outcomes remain uncertain and could lead to negative rating action in the year ahead if political unrest returns or the government that takes office next year adopts more populist policies, with adverse implications for debt dynamics and reform,” said Richard Fox, head of Middle East and Africa Sovereigns at Fitch.

Egypt's merchandise trade deficit narrowed year-on-year in March by 3.9 per cent, according to data released by the Central Agency for Public Mobilization And Statistics (CAPMAS) on Tuesday.

Egypt’s long-term foreign currency IDR was affirmed at BB and its long-term local currency IDR at BB+.

Such ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions.

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