Egypt’s economy has started to improve but has yet to recover from the country’s 2011 uprising and the years of unrest that followed, an international credit rating agency said.

Moody’s hailed recent economic and fiscal reforms in its annual report released Tuesday, saying they point to “improved government effectiveness and policy predictability.” Weak finances, however, remain a “key challenge” for the government, it added.

Egypt embarked on an ambitious economic reform plan shortly after President Abdel-Fattah el-Sissi took office in 2014. The government has slashed subsidies, imposed a value-added tax and allowed currency devaluation in order to qualify for a $12 billion bailout loan from the International Monetary Fund.

The austerity measures have hit the public hard, however, with inflation hovering around 30 percent for months, many import products unavailable, and soaring electricity and fuel costs.

Moody’s said reforms and financial support provided by international lenders have helped in restoring Egypt’s foreign reserves, which are currently above $36 billion, their highest level since December 2010.

“We also expect that Egypt’s high fiscal deficits and government debt levels will gradually reduce,” said Steffen Dyck, a Moody’s vice president.

Egypt’s Finance Minister Amr el-Garhy announced earlier this week that the country will face a $10-$12 billion budget deficit for the current fiscal year 2017-18, which started in July. He also said the government plans to plug the gap by increasing foreign debt issuance, and will announce future bond offerings in the coming weeks.

Egypt’s sovereign rating by Moody’s remains unchanged at B3, far below investment grade and subject to high credit risk, but the outlook remains stable.
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