Fitch is not impressed: Egypt credit ratings constant despite Sisi's win
The victory of Field Marshal Abdel Fattah Al-Sisi does not alter Fitch Ratings’ “expectation that the authorities will be cautious in addressing the large fiscal deficit”, the international credit rating agency announced Friday, adding that public finances remain the main weakness for its sovereign credit profile.
The credit rating agency noted that Al-Sisi’s victory “was not in doubt”.
The agency stated, however, that the voter turnout, around 46%, was lower than the 52% reached at the election won by ousted president Mohamed Morsi in 2012, despite the government extending polling to three days.
“A very high turnout might have enhanced the legitimacy of the return to military rule in domestic and international eyes, but we do not think economic policy, or Egypt’s relations with GCC countries that have provided grants and loans following the removal of President Morsi, will be affected,” the credit rating agency added.
Fitch Ratings pointed out that the government’s actions, along with Al-Sisi’s broad pronouncements, indicate that the authorities are focusing on the risks of popular opposition to fiscal consolidation, which would initially focus on subsidies.
According to Fitch Ratings, Egyptian authorities will proceed with taking small steps towards implementing subsidiary reforms to control consumption.
On Monday, the Ministry of Finance announced that it had referred the fiscal year (FY) 2014/2015 general budget to the presidency for approval, following an almost two-month delay from the constitutional day of release.
According to the fiscal year (FY) 2014/2015 budget, public spending is targeted at EGP 807bn, while revenue targets register EGP 517bn. The allocated figure for electricity subsidies jumped from EGP18bn to EGP 33bn. Meanwhile, petroleum subsidies have been cut to EGP104bn, compared to last year’s EGP 135bn – an approximately EGP 31bn decrease.
Earlier this month, international rating agency Standard and Poor’s affirmed Egypt’s long term and short-term foreign and local currency sovereign credit ratings, putting the country’s outlook at “stable”. The agency also forecasted that Egypt is expected to receive further support funds the Gulf Cooperation Council (GCC) states.