Egypt may see Greek-style debt crisis: Credit research firm

Mohamed Hammad, Monday 27 Feb 2012

Political upheaval would bring further credit downgrades for Egypt but international assistance may keep the country afloat, says analyst

Coming soon to Egypt?: Scenes in Greece amid demonstrations against new austerity measures (Photo: Reuters)
Renewed political upheaval could send Egypt's credit rating plunging two further grades to the same level as Greece, the head of Cairo-based research firm Middle East Ratings and Investor Service (MERIS) has told Ahram's Arabic-language portal.
Amr Hassanin, MERIS' head, added that Egypt's domestic debt indicators are also approaching those held by the troubled Mediterranean country.
But he went on to say that international assistance will help keep the country afloat, and that the Egyptian economy remains "on the safe side", even after four downgrades of its credit rating in the wake of last year's uprising.
"The offers of loans from the World Bank and the IMF [International Monetary Fund] are strong evidence that Egypt’s economy is currently safe," Hassanin told the news portal.
In early February, Standard & Poor's downgraded Egypt's credit rating, citing a plunge in the country’s foreign reserves and persistent political instability.
S&P lowered the ratings on long-term foreign and local currency debt to B, five steps below investment grade. It was S&P's third downgrade for Egypt in four months.
Hassanin said another downgrade was possible in the aftermath of the Port Said disaster on 1 February which left 74 dead and sparked street battles. A fresh wave of unrest on Egyptian streets could prompt a further fall of the country's credit rating to "very poor" he added.
Five days ago, Fitch Ratings downgraded Greece's credit rating further into junk status, from 'CCC' to 'C'.
In January Egypt’s gross domestic debt climbed to LE1.095 trillion at the end of September, up LE50 billion from June, a monthly bulletin from the Central Bank of Egypt (CBE) reported.
The rise brings Egypt's debt to 69.8 per cent of its gross domestic product (GDP).
Egypt's external debt reached $34.9 billion at the end of the 2010-11 financial year, an increase of $1.2 billion on the year before, according to a report from the Central Bank of Egypt
MERIS was established in 2003 as a joint venture between Finbi (Finance & Banking Consultants International) and Moody's Investors Service to provide credit rating research services in Egypt and across the region.
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