Egypt credit rating boosted to ‘positive’

Moody’s Investor Service has boosted Egypt’s long term issuer rating from “stable” to “positive”, as the government continues to enforce stringent economic reforms across the country.

Citing progress in implementing a programme backed by the International Monetary Fund (IMF), the credit agency affirmed Egypt’s B3 rating, six levels below investment grade, stating that a future downgrade is currently very “unlikely”.

“The substantial progress made by the government in implementing reforms agreed with the IMF has imparted a degree of financial stability not present earlier in the decade,” Moody’s said in a statement, while noting that debt refinancing risk “remains a key credit challenge for the sovereign in an increasingly turbulent global financial environment”.

Egypt’s deficits have shrunk, its national debt burden has begun to fall and foreign exchange buffers have been rebuilt as President Abdel Fattah Al-Sisi’s austerity plan has curtailed public spending and cut heavy subsidies to numerous industries.

READ: Egypt hikes gas prices by up to 75% in IMF-backed austerity plan

“If sustained, the authorities’ commitment to reform has the potential to impart to the credit profile a degree of resilience to economic and financing shocks, which could support a higher rating,” the report concluded.

Whilst the IMF has praised the Egyptian government’s efforts, earlier this year it emphasised that the country must deepen reforms and cut back state funding to achieve higher growth.

Last year, inflation in Egypt reached its highest level since 1986, at 33 per cent; the country had struggled with the devaluation of its currency to half its value for many months, after it was floated by the government in 2016. Finance authorities also introduced VAT for the first time, increasing the cost of countless goods; it simultaneously cut state subsidies on fuel, electricity and water.

The policies have added to the financial woes of many millions of Egyptians living below the poverty line, who have complained of being unable to afford basic necessities since the price jumps. In June, it was reported that Egypt is also planning to increase public tax revenues by 131 per cent over the next four years.

READ: Central Bank rejects Egyptian Tax Authority proposal for disclosure of accounts

Last month, in an unprecedented show of digital dissent, hundreds of thousands of Egyptians took Twitter to voice their discontent and call for Al-Sisi to step down in the aftermath of further fuel and electricity subsidy cuts.