CAIRO: Fitch Ratings said Wednesday that subsidy reforms in Egypt along with lower oil prices were a contributory factor to the recent upgrade of the country credit rating to ‘B’.
In December, Fitch Ratings raised Egypt’s long-term foreign and local currency issuer default ratings (IDR) to “B” from “B-,” and the outlooks were maintained at “stable.”
“Oil importers are benefiting from lower prices through reduced import bills and lower fuel subsidy costs… Egypt is a small net importer, but spent around 6 percent of GDP on fuel subsidies in FY14 (to end June), Fitch said in a Wednesday report.
The agency stated that lower oil prices narrowed the divergence between the ratings of energy exporters and importers in the Middle East and North Africa (MENA.)
“The ratings of MENA energy importers range from ‘BBB-‘ (Morocco) to ‘B’ (Egypt and Lebanon). Energy exporters’ ratings range from ‘BBB’ in Bahrain to ‘AA’ in Abu Dhabi, Kuwait and Saudi Arabia,” said Fitch.
Meanwhile, the agency warned of escalating geopolitical risks in the MENA region, adding that activities of the Islamic State group “pose risks to several MENA sovereigns.”