Moody's sees no improvement in Egypt bond rating

Waad Ahmed , Thursday 3 Oct 2013

Thursday statement published by credit rating agency Moody's affirms Egypt's negative outlook, Caa1 credit rating


Credit rating agency Moody's does not expect Egypt's rating to rise in the near future, affirming Egypt's negative outlook and Caa1 credit rating in a Thursday statement.

Moody's attributes the negative outlook to the "economic dislocations" and "uncertainty" dominating the political sphere since the 2011 Revolution.

The implementation of economic and fiscal reforms would be credit positive; however, political tensions undermine those reforms, the statement added.

"I disagree with Moody's rating and find it politically derived. I also believe they are subjective and are attempting to interfere with Egypt's political sovereignty," Hany Genena, chief economist at Pharos Holding, told Ahram Online.

Egypt's interim government has been developing plans for economic reform and has implemented a number of emergency measures.

These measures include a LE22billion economic stimulus package in the current fiscal year, to be spent on infrastructure and other activities capable of reviving the battered economy. In addition, the government is reforming the balance of payments and plans to reduce its deficit through reforming fuel subsidies and other measures.

Egypt's current government took charge of the country following the popularly-backed ouster of former president Mohamed Morsi on 3 July.

There are several indicators that the Egyptian economy is improving.  The stimulus package and the lifting of some European travel warnings to Egypt are the clearest indicators of this, Genena added.

Moody's most recent rating action in July affirmed the downgrade made in March, when the agency downgraded Egypt's government bond rating from B3 to Caa1 negative outlook.

The July rating action was influenced by the boost in Egypt's international liquidity provided by a $12 billion external financial support package from Saudi Arabia, Kuwait and the United Arab Emirates. The "road map laid out by the interim, military-installed government for a return to democracy by early 2014, and the recent containment of the government's debt-financing costs, below post-Revolution peaks," also played a role, the report stated

The March downgrade was derived from the polarisation within the then-ruling government, the weakening in Egypt's internal payment position, and the lack of predictability in economic and fiscal policies outcomes.

Since the 2011 Revolution, Egypt has seen a series of negative rating actions by the three most prominent international ratings agencies – S&P, Fitch, Moody's – who have cut Egypt's sovereign debt rating a total of 18 times.

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