Fitch Upgrades Egypt to 'B'; Outlook Stable

Fitch has also upgraded the issue ratings on Egypt's senior unsecured foreign and local currency bonds to 'B' from 'B-'. The Country Ceiling has been upgraded to 'B' from 'B-' and the Short-term foreign currency IDR affirmed at 'B'.

KEY RATING DRIVERS
The upgrade of Egypt's IDRs reflects the following key rating drivers and their relative weights: High

The government has embarked on a policy course designed to tackle some of the serious structural weaknesses that have emerged or intensified in recent years. Fuel subsidy cuts and tax hikes have been implemented as part of a clear five-year fiscal consolidation strategy.

Power shortages are being tackled, overdue payments to oil companies reduced, investment laws revised and disputes with foreign investors settled. The measures appear to have strong political backing.

Medium Consolidation, stronger growth and lower commodity prices will pull down the fiscal deficit, although it will remain large compared with peers, at a forecast 10.2% of GDP in FY15 (to end June). Excluding grants, the deficit is forecast to narrow by 6.3% of GDP in FY15. Fuel subsidies have been cut, new taxes introduced and existing taxes reformed in a largely front-loaded reform programme.