Moody's cuts Egypt rating on 'unsettled' conditions
New York, March 21, 2013
Moody's Investors Service on Thursday downgraded Egypt's sovereign foreign currency credit rating to Caa1 form B3, citing unsettled political conditions, and said risks of a default have increased.
Egypt's economy has been in crisis since the 2011 overthrow of Hosni Mubarak, with Islamist President Mohamed Mursi's cash-strapped government grappling with sliding currency reserves, dwindling tourism, a soaring budget deficit and a wave of often violent street protests.
"More than two years into the Egyptian revolution, the continued unsettled political conditions have significantly weakened Egypt's economy," Moody's said in a statement.
The government's inability to secure financing from the International Monetary Fund has exacerbated a lack of predictability in the Middle East nation's economy and fiscal policies.
The outlook on the credit is negative, Moody's said. Egypt is rated one notch higher at B-minus with a negative outlook by Standard & Poor's while Fitch Ratings has Egypt two notches higher at B with a negative outlook.
"The sustained deterioration in Egypt's external payments position and government finances have reached a level at which the country's vulnerability to economic or political shocks has widened and the risk of default has consequently increased," Moody's said.
While the risk of a default has increased, Moody's cautions that a default is not necessarily imminent.
"At the Caa1 rating level, the historical record shows that the average, cumulative default rate over a one-year horizon is close to 10 percent and over a five-year horizon slightly under 40 percent," Moody's said. - Reuters