Fitch Ratings upgraded Egypt's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B+' from 'B', with a stable outlook. The agency highlighted several drivers for its decision to upgrade its rating, starting off by hailing the anticipated completion of the IMF’s extended facility in 2019, which, according to Fitch, will continue to generate better economic outcomes beyond the agreement. The agency also shed light on the downward path of the government debt-to-GDP ratio, which was underpinned by structural improvements to the budget, and the emergence of primary budget surpluses. On the fiscal side, Fitch applauded the government’s commitment for further fiscal consolidation, and presented its own fiscal expectations. Fitch expects the budget sector deficit to narrow to around 8.6% of GDP in FY19, with a primary surplus of 1.6% of GDP, close to the government’s 2% of GDP target. For the medium term, by FY22 the government aims to narrow the deficit to 4.5% of GDP by continuing to run 2% of GDP primary surpluses. Fitch forecast smaller primary surpluses, but that, nevertheless, consolidated general government debt/GDP will decline to 83% in FY20, from 93% in FY18 and a peak of 103% in FY17. 
 
The agency also highlighted the improvement in the macroeconomic backdrop as part of its decision, as 2018 has witnessed stronger growth and disinflation. For FY20, the proposed budget again targets 2% of GDP primary surplus and a budget deficit of 7.3% of GDP. The consolidation will mostly come from lower interest payments, which are expected to fall by at least 1% in FY20 because of the disinflation trend, lower interest rates and lower debt, as well as another round of subsidy reforms, including the introduction of an automatic fuel tariff adjustment mechanism. Further moderation of the wage bill/GDP and continued efforts to improve the tax administration will also be contributors. Fitch sees inflation continue dropping in 2019 and 2020, with their forecasts at 12% and 10%, respectively. As for growth, the agency sees growth to remain robust at 5.5% in FY19 and FY20. The increase in the country’s reserves has also supported the agency in upgrading its rating, as Egypt’s reserves have risen to six months of current external payments (USD42bn).