PARIS (AFP)
Moody’s said Thursday it had downgraded Egypt’s government debt rating by one notch to B1 over concerns about the country’s weak economy, financial deterioration and political instability.
It also warned that Egypt’s outlook remains negative. Ratings of B are considered speculative and subject to high credit risk.
Moody’s said the decision was due to “the country’s ongoing economic weakness and financial deterioration, as reflected in the sharp loss in official foreign exchange reserves since the beginning of this year.” It warned of “continued macroeconomic weakness and instability, and the rising pressures on budgetary spending and financing.” Moody’s also raised concerns over “the continued unsettled political conditions and the uncertainty over the transition to a stable, civilian government.” Fellow ratings agency Standard & Poor’s had earlier this month also downgraded Egypt’s rating to BB-, citing weak prospects for public finances and rising risks to macroeconomic stability during the nation’s political transition. Egypt is suffering from an economic slump almost nine months after the overthrow of president Hosni Mubarak in a peaceful uprising. Egypt starts its first parliamentary election since Mubarak’s ouster on November 28 amid fears of a return of old regime figures in parliament and Islamist gains.
The military, which faces growing criticism of its handling of the transition, has said it would hand over power after a presidential election. Following the parliamentary and senate elections, a committee is scheduled to draft a new constitution and then presidential elections are to be held. The committee has up to six months to finish its work, meaning the presidential election might not be held until late August.
