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Fitch upgrades Egypt to B+
Fitch's new rating of B+ on Egypt is one notch higher than S&P (B with a stable outlook), and two higher than Moody's (B- with a positive outlook).
Moody's rating decision is dated August 2018, so the positive outlook raises the posibility of an upgrade during 2019. S&P's rating is dated May 2018, but the stable outlook implies that no change should be expectd in the near future - rating agencies usually signal likely rating changes through a positive/negative outlook.
Fitch's press releas announcing the upgrade says that the improved macro-economic stability, fiscal consolidation and stronger external finances that have occured during the three-year IMF programme are likely to generate benefits beyond the end of the programme, in November this year.
Fitch expects the budget sector deficit to narrow to about 8.6% of GDP in the year ending June 2019. It notes that spending on subsidies and social benefits was flat in nominal terms during the first half of this fiscal year.
An improved budgetary position will arise due to lower interest payments driven by lower inflation, lower debt levels and another round of subsidy reforms (ie less government spending on subsidies).
Ftich says that consumer price inflation fell to 14.4% yoy in 2018. It is forecasting 12% in 2019 and 10% in 2010.
International reserves rose to $42bn at the end of 2018, which would cover about six months of imports.
Debt service is likely to be about $10bn in 2019-2020, Fitch says, of which about $7.5bn wil be repayments and interest on external sovereign debt. Fitch is assuming that 75% of maturing GCC deposits placed with the Central Bank of Egypt will be rolled over.
Fitch's full press release is here and a pdf is attached below.
For more information, please contact Pelin Yazgan, Director, Financial Institutions, Fitch Ratings. email@example.com or 020 3530 1313
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