Fitch affirms Egypt rating at 'B' with stable outlook

International credit rating agency Fitch has affirmed Egypt's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at a 'B' with a Stable Outlook.

The issue ratings on Egypt's senior unsecured foreign and local currency bonds have also been affirmed at 'B'. The Country Ceiling has been affirmed at 'B' and the Short-Term Foreign-Currency IDR at 'B', the agency said in a statement released on Monday.

Fitch cited Egypt's high fiscal deficit and general government debt/GDP ratio, low foreign-reserve coverage of imports and recent volatile political history, against its low external debt and gradual economic and fiscal reform, as the main drivers behind the decision to neither upgrade nor downgrade the country.

The agency estimated a budget deficit of 11.6 percent of GDP for the fiscal year ending in June, on par with the previous year, due to the government’s failure to introduce the Value-Added Tax as planned, which is estimated to raise revenue by about 1 percent of GDP, a sharp devaluation of the Egyptian pound in March and “surging interest payments.”

Fitch expects the budget deficit to narrow to 11 percent of GDP in the coming fiscal year, due to the late introduction of the VAT and further fuel and electricity subsidy cuts, rather than the 9.8 percent in the draft budget presented by the government for parliamentary approval.

“General government debt increased to an estimated 90.3 percent of GDP in FY16, well above the peer median,” the agency said.