Securing IMF deal would be credit positive for Egypt - Fitch

Monday 01-08-2016 05:44 PM

Logo of Fitch Ratings. REUTERS

CAIRO, Aug 1 (Aswat Masriya) – Fitch Ratings said on Monday if Egypt secured funds from International Monetary Fund (IMF), it would be credit positive for Egypt.

The international credit rating agency has affirmed Egypt's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B' with a Stable Outlook.

Egypt received on Saturday an IMF mission to conduct negotiations over a $12 billion loan request by the government which is aiming to raise $21 billion over three years.

Egypt has been scrambling to collect money as it faces a shortage in foreign currency due to pressures on its foreign reserves after years of political turmoil, triggered by the 2011 Uprising that toppled former president Hosni Mubarak, halved the country’s foreign reserves and scared away tourists and investors. 

Fitch expects the IMF to be “accommodating to Egyptian concerns over too sharp a fiscal retrenchment,” given political risks and the need for economic growth.

If faced with popular opposition, “the Egyptian authorities could shy away from reforms at some stage during a three-year programme”, Fitch said.

The credit rating company said that even if the implementation plan proceeds, “Egypt faces a testing period of fiscal, monetary and structural reform."

In an interview with Aswat Masriya last month, Planning Minister Ashraf al-Araby said that the government will start implementing a 2-year economic reform plan, until June 2018.

The main pillars for reform include the restructuring of energy subsidies, which includes increasing fuel prices and application of smart cards system.

The plan also includes the implementation of Value-Added Tax instead of the Sales Tax and containing the government’s wage bill.

Araby said that “the rich will bear the cost of the economic reform and the tough procedures that it includes” as opposed to the poor.

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