Mubasher: Egypt's new budget and lower electricity and fuel subsidies demonstrate a continued commitment to fiscal consolidation and economic reform, backed by the country's IMF programme, Fitch Ratings said in a report issued on Wednesday.
“The general budget for fiscal year 2017/2018 projects GDP growth of 4.6%, broadly in line with Fitch's forecast. We think politics presents the key risk to consolidation, which stalled in FY16 around parliamentary elections,” the report indicated.
The rating agency forecasts a decline in the general government debt/GDP ratio to 87.9% in FY17/18 which exceeded 100% at end of fiscal year 2016/17 following the flotation of the Egyptian pound, but this is highly dependent on securing a small primary surplus and increasing economic growth.
Fitch's forecasts a budget fiscal deficit of 9.3%, and a primary deficit of 0.3%, which implies modest slippage against the target while maintaining deficit reduction.
The report also noted that Fitch thinks there is some scope to offset higher spending by reducing capital expenditure, depending on how revenue performs. Public finances are a key weakness in Egypt's sovereign credit profile.
