Egypt has been given a ratings boost by Fitch in light of its progress in implementing economic and fiscal reforms.
Rating agency Fitch upgraded Egypt’s long-term foreign-currency issuer default rating from ‘B’ to ‘B+’ and also issued Egypt with a ‘stable’ outlook.
According to Fitch, the decision was driven by the success of its economic reforms which has resulted in “improved macroeconomic stability, fiscal consolidation and stronger external finances”.
Egypt is also due to complete the three-year International Monetary Fund (IMF) extended fund facility later this year and Fitch forecasts that the ongoing reforms will “continue to generate better economic outcomes beyond the IMF agreement”.
The establishment of Egypt’s first sovereign wealth fund was another part of the economic reforms implemented in line with the IMF’s demands and earlier this month Egypt’s prime minister Mostafa Madbouly issued the basic regulation for the fund.
Fitch states that a further upgrade could be issued if there are significant improvements across structural factors, such as governance standards, the business environment and income per capita or sustained progress on fiscal consolidation that leads to a further reduction of government debt versus GDP.
However Fitch also warns that a failure to narrow the fiscal deficit, a reversal of the economic and fiscal reforms in the face of social unrest or renewed downward pressure on international reserves due to strains on the balance of payments could all lead to a potential downgrade.
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