CAIRO: Egypt’s public finances and economic conditions have improved thanks to reforms, but the government’s large financing needs remain a “key challenge,” global rating agency Moody’s Investors Service said in a Tuesday report.
Structural economic issues such as high unemployment and inflation, and elevated political risks, are also among the challenges Egypt faces, it added.
“We expect that the economic and fiscal reform momentum in Egypt will help fiscal deficits and government debt levels to gradually reduce, although government financing needs remain relatively large” said Moody’s Vice President and Senior Analyst Steffen Dyck.
Moody’s said Egypt’s economy is projected to grow by five percent for the current fiscal year 2015-2016 (to end June 30,) up from an expected 4.5 percent in the previous fiscal year.
“Egypt’s economic growth over the next 12-18 months will likely be supported by both public and private investment,” the rating agency anticipated.
Egypt’s government debt has slightly reduced to 90 percent of GDP in FY2014/15, Moody’s data shows, but “the level remains elevated as a result of persistent fiscal deficits.”
In a tightened budget for FY 2015/16, the government is working on reducing the deficit to 8.9 percent of GDP, that Moody’s said would depend on revenue performance.
Moody’s described the government’s track record of implementing revenue-enhancing measures, such as the introduction of new taxes, as being “mixed,” criticizing the suspension of introducing of a value-added tax as replacement for the current sales tax several times.
“The Suez Canal expansion will make credit-positive contributions to Egypt’s fiscal revenues and balance of payments over the medium-term,” Dyck concluded.