Moody's places Egypt’s ratings on review for potential downgrade

PanARMENIAN.Net - Moody's Investors Service has placed the sovereign-debt ratings for Egypt on review for potential downgrade, citing the unsettled political conditions and uncertainty around the government's ability to get an International Monetary Fund loan, The Wall Street Journal reported.

Egypt's continuing political violence is wrecking havoc on its economy. President Mohamed Morsi's decision to issue a decree last November, which granted him supreme powers that can't be challenged by the judicial system, triggered violent demonstrations. The North African country, the most populous state in the Arab world, hopes also to clinch a much-delayed $4.8 billion loan from the IMF to replenish its fast-dwindling foreign-currency reserves, plug a gaping budget deficit and restore investor confidence.

Egyptian Prime Minister Hisham Qandil said Sunday that talks with IMF--suspended in December after fresh protests erupted--would be "back on track very soon."

Moody's said the re-emergence of political turmoil despite Egypt's transition to civilian rule last year, the recent imposition of capital controls by its central bank to limit foreign-currency cash withdrawals from the country's banks and the continued rise in the government's already-high fiscal-financing costs will be considered in the review.

The ratings company said should it decide to downgrade Egypt's government bond rating, the move would likely prompt the lowering of its country ceilings for bank deposits and bonds.

Moody's in September affirmed the country's rating at B2, five notches into junk territory, and assigned a negative outlook. Last month, fellow ratings company Standard & Poor's lowered Egypt's rating to B-minus, one step lower than Moody's assignment.