Economy improves, but Egypt still over-indebted

While Egypt continues to face challenges, economic and fiscal reform momentum support its B3 rating and stable outlook, says Moody's in a new report. Despite a slowly improving economy Egypt's very large government financing needs of more than 50% of GDP annually form its key credit weakness. "Although still below pre-revolution levels, economic growth has started to pick up, and investor sentiment has improved. We also expect that high fiscal deficits and government debt levels will gradually reduce. The domestic market continues to provide a sizable funding base for the government," says Steffen Dyck, a senior credit officer at Moody's.
The governor of Egypt's Central Bank, Tarek Amer, arrived in Germany on Monday this week for a three-day visit to discuss the country's support for the deal between Egypt and the International Monetary Fund, state news agency MENA reported. Amer has also met with a number of senior German officials such as the head of the Deutsche Bundesbank in an attempt to strengthen financial and monetary relations between the two countries.
Egypt reached a staff level agreement in August for a three-year extended fund facility (EEF) programme worth about $12bn, to be provided over three years, but is dependent on IMF board approval, which is expected by October 9th.

The country relies heavily on imports, mostly food, and embarked on a fiscal reform programme in July 2014 to curb the growing state budget deficit –estimated at 11.5% of GDP in 2015/2016. Value-added tax was recently introduced and the government has cut back of state subsidies. Key for the government is a revitalisation of the country’s tourism sector, which has been decimated by sporadic terrorist attacks and civil unrest.