CAIRO: Egypt’s long- and short-term foreign and local currency sovereign credit ratings were affirmed at B-/B by Standard & Poor’s Ratings Services in a Friday release, while the outlook was kept as “stable.”
The rating agency cited an increasingly “stable political and security situation” in the country as well as an upcoming expected donor conference as rationale for the rating. It also noted the upcoming parliamentary elections as a “key political milestone.”
“Nevertheless, the ratings remain constrained by Egypt’s high fiscal deficits, very high general government debt, large borrowing needs, and still-low GDP growth,” the agency stated in its Friday release.
Egypt’s GDP grew 3.7% in the last quarter year on year, an increase over the previous quarter’s 2.5 percent growth, Standard & Poor’s stated.
Saudi Arabia called for the upcoming economic summit in June, following the election of President Abdel Fatah al-Sisi, and invited “friends of Egypt” to support its economy. Sisi then embraced the idea and announced the Red Sea resort of Sharm el-Sheikh as the host of the summit. The government had initially intended to host the summit as early as in November, but during the summer it was scheduled to be held from Feb. 21-22, 2015, only a few days after the Chinese New Year on Feb. 19, which is celebrated for days by several communities around the world. The summit is now expected to take place in March 2015.
In January 2014, the Fitch rating agency reviewed the outlook on Egypt’s long-term rating as “stable” after three years of “negative” and affirmed it at B- due to tentative improvements in political stability and economic conditions.
On May 30, the Fitch rating agency stated, “Egypt’s public finances are the main weakness for its sovereign credit profile, and that the victory of Abdel Fatah al-Sisi in the presidential election does not alter Fitch’s expectations that the authorities will be cautious in addressing the large fiscal deficit.”
“Consolidation measures, including subsidy reform and a broadening of the revenue base, are likely to be pursued gradually and new spending commitments and a greater emphasis on social justice will limit the pace of deficit reduction,” said the rating agency, expecting a deficit of 8.5 percent of GDP for Fiscal Year 2016.